RBA keeps interest rate on hold at 1.50 per cent

Despite falling unemployment rates and strong economic growth in Australia, the Reserve Bank (RBA) has left official interest rates on hold at 1.50 per cent for the month of December 2018. This is now the 28th consecutive month where this record low rate has been sustained.

In his post-meeting statement, RBA Governor Philip Lowe said that "The Australian economy is performing well," but the improvements will be “gradual”.

"The central scenario is for GDP growth to average around 3.5 per cent over this year and next, before slowing in 2020 due to slower growth in exports of resources.”

The job market remains strong with the unemployment rate at a six-year low of 5 percent. The falls in this rate are likely to continue and should see workers’ receiving slighter bigger pay rises in the future.

"The stronger labour market has led to some pick-up in wages growth, which is a welcome development," he wrote.

"The improvement in the economy should see some further lift in wages growth over time, although this is still expected to be a gradual process."

The overall economy is growing in line with the RBA's forecasts.

The outlook identified several areas of ongoing concern, including household consumption, the drought and the simmering trade war between the US and China.

"One continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low, debt levels are high and some asset prices have declined," Dr Lowe cautioned.

"The drought has led to difficult conditions in parts of the farm sector."

The statement concluded that the low level of rates is supporting the Australian economy and that "the board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy".

Most experts do not expect that there will be a change in the official rates until late 2019, while others are not expecting a change until 2020.

For the official RBA article, please visit the Reserve Bank’s website.

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