Rates On Hold, RBA Balancing Economy

At it’s final board meeting of 2013, the Reserve Bank of Australia (RBA) decided to leave interest rates unchanged at 2.5 per cent for the fourth consecutive month.

Loan Market director Mark De Martino said the decision to leave rates unchanged was the right choice, but not a straightforward one, as the RBA had to consider the economic indicators speeding up and slowing down the economy.

“Home loan customers and home buyers have been huge winners over the past several months. Whether it is discounting rates, waiving fee’s or offering cash-back incentives, there’s a level of competition between lenders that’s extremely intense,” he said.

In his view of the economy, Mr De Martino suggested that the small falls in the Australian dollar and inflation remaining within its targeted limit, were the principal factors keeping interest rates on hold to close the year.

“Business confidence has slipped after its post-election jump and our construction and resource investment sectors are areas to watch. But on the other hand, consumer confidence is rising and the dollar appears to be adjusting to past rate cuts, as well as several other factors.

A rate cut or rise would aid areas of the economy needing help but the RBA’s holistic approach to balancing growth and inflation means it’s best to keep rates steady. I think interest rate stability gives so many sectors confidence in doing business,” he said.

Mr De Martino said he expected home loan activity to continue to set new highs, after the Australian Bureau of Statistics reported a 40 month high in home loan approvals in September.

“The property market should continue to recover and set new highs. Investors are carrying the recovery right now but its only a matter of time before we see first home buyers return. Many first time buyers have been growing sizeable deposits for years now and are getting ready to buy.

Mr De Martino said that in November, 35 per cent of loan enquiries at Loan Market were from first home buyers.