The Royal Bank of Australia (RBA), Australia’s central bank, has decided to keep interest rates at a record low 1.5%.
It was a widely predicted decision and it comes on the back of a resurgent Australian dollar.
House value growth slowing
2 of Australia’s biggest cities, Melbourne and Sydney, have seen house prices rocket over the previous year. And this was the main reason why some were calling for rates to be upped, in order to prevent a bubble from forming. However, growth is now at a more sustainable level.
This might have helped sway the decision to maintain rates.
Household debt to income ratio is an almost staggering 200%.
Any rate rise would undoubtedly have put more pressure on consumers trying to pay down their credit cards and also risk creating a recession in Australia’s services sector.
And then there’s the usual suspects.
Like with many advanced economies right now, it suggests that whilst unemployment rates are going down, the jobs being created aren’t that great. And more importantly, consumers don’t feel confident that their financial future is good enough to go out on any shopping sprees just yet. Putting that together with rising debt levels, it suggests that whilst Australian households are spending, it’s primarily on life’s essentials.
In short, don’t expect a rate hike anytime soon.