The RBA has left rates on hold at its March board meeting / File Source: The Daily Telegraph
BORROWERS will have to wait at least another month for lower repayments after the RBA kept rates on hold today.
It is the second consecutive month the central bank has taken a cautious approach to safeguarding the economy leaving the official cash rate at 4.25 per cent - among the highest of the developed nations.
And despite the decision not to lift rates, borrowers could be slapped with even more pain, with lenders refusing to move in lockstep with the RBA.
Last month, 45 financial institutions ignored the RBA’s decision to leave rates on hold instead taking it as a green light to increase borrowing costs.
Among them, all four major banks - Westpac, Commonwealth, NAB and ANZ - opted to raise their standard variable rates by between 6 and 10 basis points, citing higher funding costs.
Today’s RBA decision met the expectations of all 24 economists in a Bloomberg News survey predicting no change.
The case for keeping rates on hold was boosted by evidence that global economic conditions has stabilised.
The larger economic story since the February board meeting has generally been more upbeat with positive data from the US, Europe and a soft landing predicted for China.
RBA Governor Glenn Stevens said dats indicated that the world is not sliding into fiscal abyss.
"Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring," Mr Stevens said.
"Several European countries will record very weak outcomes but the US economy is continuing a moderate expansion.
"Growth in China has moderated as was intended but on most indicators remains quite robust overall."
Furthermore, domestic data released this week shows labour demand remains strong.
Despite recent job losses and forecasts that unemployment will rise later this year, the ANZ Job Advertisements Series showed advertising on the internet and in newspapers rose 3.3 per cent in February.
But economists say the door is open for a rate cut in coming months with inflation slowing, the services sector shrinking at its fastest rate in two years and manufacturing remaining in the doldrums.
The Performance of Services Index slid 5.2 points in February - its sharpest slide for any month since 2009 - to 46.7 points.
Analysts say the fall in the index, calculated by the Australian Industry Group and the Commonwealth Bank, is further evidence unemployment rates may rise this year.
And inflation is slowing, according to the latest TD Securities CPI gauge, enabling the RBA to cut rates to stimulate the economy.
Meanwhile, manufacturing activity has had little to no quarter on quarter growth, hampered by the strong dollar and weak domestic consumption, according to the NAB Manufacturing Activity Index.
HSBC chief economist Paul Bloxham says global events will play a primary role in rate decisions this year.
“Picking the direction of the next move is hard,” Mr Bloxam said.
“Much depends on the global economy. Commentary from the RBA has reminded us that global events drove last year's cut.
“We expect that global uncertainty will continue to limit local hiring which, combined with the high dollar, will see a further rise in unemployment and one more cut from the RBA in the second quarter.
“But should further labour market weakness not eventuate, the loosening phase may be over.”
RateCity CEO Damian Smith said borrowers should expect higher costs regardless of RBA decisions.
“Borrowers should be prepared for frequent small changes in rates, perhaps as often as every month,” Mr Smith said.
“Last month proves that all variable rate mortgage holders are vulnerable to rate hikes, regardless of what the RBA does.
“Forty-five lenders hiked their variable home loan rates by an average of 12 basis points despite the RBA keeping the cash rate on hold at its February board meeting”.
No comments:
Post a Comment