RBA leaves cash rate unchanged

The Reserve Bank of Australia has left the cash rate unchanged at 2.25 per cent, while suggesting “further easing of policy” may be needed in the coming months.

Glenn Stevens, RBA Governor, said global financial conditions were stable and borrowing rates were hitting all-time lows in some major sovereigns.

“Some risk spreads have widened a little but overall financing costs for creditworthy borrowers remain remarkably low,” Mr Stevens said.

Commodity prices were found to have declined over the last 12 months, as did the price of oil and energy. Mr Stevens said these trends “reflect a combination of lower growth in demand and, more importantly, significant increases in supply.”

While the rate remains unchanged for the moment, Mr Stevens pointed out that another rate cut could be on the way.

“Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings.”

Michelle Hutchison, Money Expert at finder.com.au, said Australia’s lenders may be pushed to pass on the full cut if rates continue to drop.

“If the Reserve Bank cuts the cash rate again, the pressure is on for lenders to continue their good will by passing on the full cuts to variable rate mortgage holders as well as other borrowing customers such as for personal loans and credit cards,” Ms Hutchison said.

“In fact, we haven’t seen any credit card providers pass on the rate cut from last month, while just one variable rate personal loan fell by Westpac.

“It’s disappointing to see credit card and personal loan holders being excluded from the last rate reprieve. We’re hoping we’ll see a better outcome for borrowers in the coming months.”

The retail sector welcomed the steady cash rate, but said additional cuts were likely to be necessary if growth is to be supported.

“While the stable cash rate has positively impacted consumer spending, both the Federal Government and RBA must now do all that they can to ensure that retail trade is fully supported,” Australian Retailers Association (ARA) Executive Director Russell Zimmerman said.

“Unfortunately, we have seen some concerning data lately including low wages growth and a weak international environment which has left consumers and businesses feeling a little nervous. The ARA therefore encourages the government to prioritise real productive reforms and for the RBA to consider further rate cuts next month to maintain consumer confidence.”

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