The Reserve Bank of Australia [RBA] announced yesterday that it would leave interest rates unchanged at 6.25 per cent.
The announcement came as no surprise to economists who had predicted interest rates could be left on hold because of the relatively subdued growth of between two to three per cent.
According to AMP economist Shane Oliver: “Sub-par growth both globally and in Australia should see underlying inflation head down, allowing interest rates to remain on hold during the first half of the year before falling from mid year.
“By end of 2007 we see the cash rate at 5.75 per cent.”
McGrath Estate Agents chief executive John McGrath said the Reserve Bank’s decision to leave rates unchanged, along with broadbased expectations of no rate rises for the rest of the year, would prompt a significant market recovery in 2007 following three years of price correction.
The Master Builders Australian chief economist Peter Jones said a further rise would have certainly deepened and lengthened the current housing downturn.
Tyndall head of bonds Roger Bridges said the fund manager didn’t believe rates would be likely to increase after the July and November rises.
“The headline rate has been affected by bananas and petrol,” he said.
“We expected they would evaluate data as it went forward. We still believe the [RBA] policy has a bias towards tightening.
“We don’t think the data supports easing but we believe that unless something happens we’ve seen the peak in the cash rate in this cycle. We’ll have to see how that pans out.
“Saying that we probably think they’ll be on hold for a fair amount of time.”
