The Reserve Bank of Australia (RBA) decided to keep the official cash rate unchanged at a record low of 1.5% as it hinted on uncertainty about the outlook for consumption.
The cash rate has not moved for nearly three years. It was last cut in August 2016 and has not increased since November 2010.
The central bank holds onto its expectation that the economy will grow by around 3% this year because of a robust labour market. However, it also acknowledged that economic growth may have weakened in the latter part of 2018. In addition, the waning property market and slow wage growth are still issues, according to news.com.au.
“The growth outlook is being supported by rising business investment, higher levels of spending on public infrastructure and increased employment. The main domestic uncertainty continues to be the strength of household consumption in the context of weak growth in household income and falling housing prices in some cities,” RBA Governor Philip Lowe said in a statement.
Another factor that affected RBA’s decision was the state of the property market. The bank reported that the adjustment in the Sydney and Melbourne housing markets is continuing. Conditions remain soft in both markets and rent inflation remains low. Credit conditions for some borrowers have slightly tightened over the past year or so.
The demand for credit by investors in the housing market has also significantly slowed as the dynamics of the housing market have changed.
