Reserve Bank of Australia Holds Rates

It was no surprise to see the Reserve Bank of Australia (RBA) leave the cash rate at 4.75 per cent as it reviewed the economic impact of the floods across eastern Australia.

It is understandable that the RBA has resisted increasing rates this month with consumer confidence and spending down.

The RBA could do a lot to restore consumer confidence by remaining on the sidelines for the remainder of this year.

While there will be inflationary pressures as a result of the flood rebuild, consumers are wary and weary at the moment and the last thing home owners need is an interest rate rise.

Mortgage holders, particularly those also having to contend with repairing flood affected homes, just want to have an extended period of stability.

Our prediction is the RBA will stay on the sidelines and not raise rates until the last quarter of 2011.