Reserve Bank sticks with cash rate

THE Reserve Bank has left the cash rate unchanged at 1.5 per cent for another month, extending to two years the recordbreaking run without change.

Announcing the central bank’s decision yesterday, governor Philip Lowe said the drought affecting large parts of the country was a concern.

The RBA boss said the drought affecting regions of eastern Australia had created a challenging environment and “led to difficult conditions in parts of the farm sector”.

Dr Lowe said weak house- hold spending remained a source of uncertainty for the economy and a factor in the RBA board’s decision to leave the cash rate at a record low.

Dr Lowe said the inflation rate was now expected to be sitting about 1.75 per cent — outside the RBA’s target range of 2 per cent to 3 per cent — as a result of one-off declines in some prices this quarter.

The forecast was for inflation to be higher next year and in 2020, he said.

Dr Lowe said conditions in the nation’s two biggest hous- ing markets — the big cities of Sydney and Melbourne — continued to ease as investors dropped away.

Home loan volumes were also declining, in part because there were fewer investors and also due to more rigorous lending standards, he said.

On the global front, Dr Lowe said the trade stance of the US — which has imposed significant tariffs on imports from trading partners, especially China, sparking retaliation — remained a source of uncertainty. AAP