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Home / No cash rate cut for July 2017 from RBA

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As predicted by many, the Reserve Bank has left the official cash rate unchanged for the month of July 2017 at its first meeting of the new financial year. The cash rate was last moved back in August 2016, and has remained at its record low of 1.50% for the last 12 consecutive months. In his statement, RBA Governor Philip Lowe said while house prices were rising briskly in some markets, there were “some signs that these conditions are starting to ease”.

The growth in housing debt has continued to overtake the slower growth in household incomes, which has heightened the risks associated with rising levels of household indebtedness. In contrast, rent increases are the slowest they have been for two decades.

Growth in consumer spending remains low, which is in line with slow growth in wages and high levels of household debt. “Consumers continue to face a number of headwinds such as soft wages growth, slower house price increases, high leverage and out-of-cycle mortgage rate increases, all of which are likely to weigh on spending going forward,” said ANZ economist Daniel Gradwell.

However, experts warn that rate hikes are not too far off; last week, former RBA board member John Edwards warned there could be as many as eight interest rate rises in the next two years as economic growth picks up. Due to this, the chances of an official cash rate rise before Christmas has increased.

New statistics highlight the fact that Australia’s property market is slowing down, but not crashing. Eastern capital city housing values have seen a 0.8% increase over the last quarter, which is the slowest they have been since December 2015.

Earlier this week, Westpac Bank launched a new campaign offering a fixed rate below 4% within the residential investment property market. This was done to combat the rising mortgage rates for investors. The fall in the Australian dollar since 2013 has assisted the economy with its transition out of the mining investment boom.

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