The decision comes as little surprise to observers who predicted that a sharp 1.2% fall in GDP during the March quarter would influence the RBA’s decision, and RBA governor Glenn Stevens admitted as much in his official interest rate decision statement.
“The floods and cyclones over the summer have reduced output in some key sectors. As a result there was a sharp fall in real GDP in the March quarter, despite a solid increase in aggregate demand,” he said.
He added that “close to target” inflation levels over the next 12 months were likely, raising hopes that rises will be off the agenda in the near-term, but economists are still tipping an August rate hike.
In the meantime, the decision has drawn cautious praise from property industry insiders, with HIA senior economist Andrew Harvey calling it “a rare bit of good news amidst mounting pressure on home affordability and fast-declining activity in the residential building sector."
“It just gives a touch of relief to those Australians paying off mortgages and also to those trying to enter the housing market, amidst the less predictable environment households face in the post-GFC era,” he added.
The RBA’s next interest rate decision will be made on 5th July.
