04 February 2014 RBA rate announcement

The Reserve Bank of Australia has announced the outcome of its first board meeting of the year.

In a move which will shock few economists, commentators and investors, the RBA has announced it will leave the official cash rate on hold today at 2.5 per cent.

Jessica Darnbrough, head of corporate affairs at Mortgage Choice, said the RBA’s decision was ‘largely unsurprising’ due to the recent strength of the Australian economy.

“New research from National Australia Bank found business conditions and confidence is on the up, with conditions reaching a two and a half year high last month,” she said.

“Further, consumer confidence currently remains comfortably in the zone where optimists outnumber pessimists. According to the latest Westpac Melbourne Institute of Consumer Sentiment Index, Australians are relatively optimistic about the economy, and there is evidence that both house prices and housing activity are responding well to the low interest rate environment.”

Tim Lawless, national research director at RP Data also said the decision by the RBA was in line with expectations and came on the back of recent positive housing data.

“The latest housing market results take annual capital gains across the combined capital cities to 9.8 per cent, with every capital city apart from Hobart recording a rise in dwelling values over the year,” he said.

“The improved housing market conditions have provided a substantial flow on effect to the housing construction sector as developer confidence improves with housing market conditions. Dwelling approvals are up close to 22 per cent over the 2013 calendar year and there have been consistent rises in the number of new home sales. We expect housing market conditions to remain buoyant while mortgage rates remain so low, however further rate cuts are looking like an outside bet at best.”

In a story from earlier today, finder.com.au said even if rates remained on hold, borrowers could benefit from the ongoing rate war between lenders - with New South Wales borrowers set to be the biggest beneficiaries of the competition.

Reproduced in full with permission: Smart Property Investment RBA rate announcement 4 February 2014

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