The outcome of its second meeting for the year also marks the 18th consecutive month the cash rate has stayed at its present level.
While commentators agreed a rate hike was on the horizon, many said it was still too soon.
“Very weak wages growth, sub-target inflation, the Australian dollar remaining too high and uncertainty around the outlook for consumer spending all argue for rates to remain on hold or even fall,” said AMP Capital chief economist Shane Oliver.
“On balance it makes sense to continue to leave interest rates on hold.”
NAB chief economist Alan Oster and St.George Bank senior economist Janu Chan echoed sentiments that the wages data was still too weak and pointed to the spare capacity that remained in the domestic economy.
In contrast, the Australian National University Centre for Applied Macroeconomic Analysis RBA Shadow Board’s Mark Crosby said a rate hike was “now very near”.
“The only issue is the wait on international market moves and whether the RBA should be ahead or following in particular the [US Federal Reserve],” he said.
“Assuming a first rate rise does happen in the next few months, a further rise later in the year should follow unless financial market volatility is significant after a first increase.”
But Metropole Property Strategists director Michael Yardney disagreed that the Reserve Bank would be taking its cues from its American counterpart, arguing RBA governor Philip Lowe “has made it clear that Australian rates don’t need to be in lock step with overseas rates”.
“There is currently no reason to change rates to either stimulate or slow down our economy,” Mr Yardney said.
Perhaps we are entering a period where low inflation and an extended period of low interest rates allows central bankers not to have to take the lead..?? Interest rates are on the rise regardless of the RBA – as the real cost of money and area risk premium is being sought by lenders. Mortgage rates are up 1% from their lows and bonds are down as yields are higher…all as it should be, without mummy telling us what to do (or pay!). What many seem to completely have miss-read is that the bond market is far bigger, far more complex and dangerous than even shares. That’ where the next financial crunch is coming from and this time there will be no ability to control markets with reduced interest rates as all those bullets have been fired. If the RBA was really ahead of the curve it would have taken rates higher in 2017 so that it had some ability to reduce them when the US bond market crash happens in earnest. It’s almost too late to flee to cash now, as that was the correct move about 4-6 months ago, at the peak of the property/equity cycle, as interest rates were already into their correction phase. Holding about 70-80% in cash will most likely prove to be a wise move for the next 3-6 months.
The incentive is in the extremely high housing prices requiring a huge deposit, something baby boomers didn’t require.
Unfortunately raising rates right now would be an economic disaster.
In the 1980s we had high interest rates. My brother, a baby boomer, lost his home when the interest rate hit 17%.
I pity the poor pensioners, kids and regular savers alike! Where’s the incentive for our kids to learn the value of saving, as it was there clearly for the baby boomers?! The federal reserve in America has MUCH to answer for in creating this virtually world wide situation with negative/zero or very low rates. A flight to safety into cash is now a real compromise.