Australian interest rate remains unchanged

Posted on May 5, 2009 by peter 
Filed under Australia Mortgage and Finance News · Tagged: , , , ,

The Reserve Bank of Australia held it’s monthly meeting today and decided to freeze interest rates, leaving the official cash rate unchanged at 3.00%.

The RBA said confidence remained fragile but there were some signs economies around the world were stabilising.

RBA governor Glenn Stevens said Australia’s economy was poised to benefit from the significant cuts to interest rates made so far, combined with the Federal Government’s fiscal stimulus. “Market and mortgage rates are at very low levels by historical standards and business loan rates are below average, reducing debt-servicing burdens considerably,” he said.

“Much of the effect of these changes is yet to be observed. “The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead.”

Domain spokesman, Anthony Ishac commented, “The official cash rate remains unchanged at the current level in response to signs of a stabilising world economy. However, the RBA remains vigilant, maintaining enough scope on rates to manoeuvre in anticipation of forecast rising unemployment later in the year. Any future action will also need to factor the reluctance of the major banks to pass on rate cuts in full to mortgage holders”.

Most economists had not expected interest rates to come down again.

“In pondering the cash rate level … the RBA board will likely be persuaded by both international and local developments since the April decision to leave the cash rate unchanged,” said HSBC chief economist John Edwards yesterday.

“The downturn in China has been arrested. In a number of other major economies, including the US and Japan, the rate of deterioration is slowing.”

Earlier today, building approvals posted a stronger-than-expected 3.5 per cent jump for March above the market expectations of a 2.3 per cent rise.

Economists said the building sector could be recovering.

“It had been expected for some time that the tight rental market, low interest rates and soaring population growth would translate to stronger building activity, and it now appears to be taking hold albeit from a very depressed level,” said Commsec chief economist Craig James.

“It is important to remember that it does take awhile to for approvals to follow the improvement in economic conditions.”

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