The current cash rate is a historic low, after it was implemented in July as the second in two consecutive rate cuts.
The RBA’s move to maintain the rate was widely anticipated by rate experts, as found in a Finder survey.
Governor Philip Lowe hinted further rate cuts could be on the horizon, if the board decided the economy needed further support.
“It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress toward the inflation target,” Mr Lowe said.
The majority (61 per cent) of experts have tipped a further cut for November, with Finder finding three-quarters or 76 per cent of specialists and economists expect the rate to drop before Christmas.
Around 59 per cent of experts expect the rate to drop to 66 cents or lower.
Graham Cooke, insights manager at Finder, said he’d never seen such a strong bias toward a move in a particularly month, as predictions are usually spread out over a couple of months, yet since 1990, the cash rate has dropped 10 times in November.
Dr Shane Oliver, chief economist at AMP Capital has contrarily forecast a 0.25 per cent cut in October, followed by a second cut taking the rate down 0.5 per cent.
“The RBA is under a lot of pressure to cut rates further. This is despite the economic positives we’ve seen lately – the tax cut, the rate cuts that have already occurred and the Australian dollar’s recent fall which will help the economy,” Dr Oliver wrote.
“The problem is that none of those things – or the combination of them – [are] likely to help the economy enough to tackle some of the big headwinds the local economy is facing. They’re unlikely to help drive unemployment down, or wages growth up or inflation up.”
Domestic economic growth in the first half was low, Mr Lowe said, but the central bank expects growth in Australia will pick up in the next couple of years.
“The outlook is being supported by the low level of interest rates, recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some established housing markets and a brighter outlook for the resources sector,” Mr Lowe said.
“The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income and a stabilisation of the housing market are expected to support spending.”
Additionally, wage growth and inflation pressures have both remained subdued, although Mr Lowe added there are further signs of a turnaround in established housing markets.
Results from Finder’s Economic Sentiment Tracker, which gauges five indicators – housing affordability, employment, wage growth, cost of living and household debt – all tipped more negative this month.
September’s results have seen the tracker at a record low for economic sentiment in household debt (10 per cent).
The RBA hinted last week in its four-year corporate plan that Australia’s high-debt levels could complicate its monetary policy.
Housing affordability was the only metric Finder found respondents had a semi-positive outlook in its sentiment tracker.
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
