RBA cites jobs boost in cash rate ‘hold’

AN upbeat Reserve Bank held the cash rate at a record low 0.75 per cent while having “surprisingly” little to say about the headwinds presented by the catastrophic summer bushfires and coronavirus crisis.

The central bank board’s first interest rate decision for 2020 was to delay cutting to a fresh record low 0.5 per cent, with RBA Governor Philip Lowe citing improved unemployment figures for December, low borrowing costs, recent tax refunds and improved property market indicators in his announcement yesterday.

The improved December unemployment figures were singled out in Dr Lowe’s statement, with the RBA expecting the jobs rate to remain at 5.1 per cent “for some time” before gradually declining to a little below 5.0 per cent in 2021.

Dr Lowe did acknowledge the looming economic impact of the bushfires and coronavirus outbreak, but BIS Oxford chief economist Dr Sarah Hunter said the absence of any further insight was noted.

“Surprisingly the board had very little to say about the impact of the bushfires and the coronavirus outbreak, other than to say that it’s not possible at this stage to know the full impact of the virus,” Dr Hunter said in a note yesterday.

Market expectations of a February cut had evaporated from rusted-on certainty in October to an outside chance following a bump in quarterly inflation and improved employment figures.

Annual inflation climbed 0.1 per cent to 1.8 per cent for the December quarter.