Aus­tralia’s cen­tral bank holds rates as home prices de­cline

Times of Oman - - MARKET -

SYD­NEY: Aus­tralia’s cen­tral bank kept in­ter­est rates at a record-low on Tues­day as a drop in house prices ac­cel­er­ated.

Bor­row­ing costs have stayed at 1.50 per cent since they were last cut in Au­gust 2016, when the econ­omy was tran­si­tion­ing away from an un­prece­dented mining in­vest­ment boom.

“The low level of in­ter­est rates is con­tin­u­ing to sup­port the Aus­tralian econ­omy,” Re­serve Bank of Aus­tralia (RBA) gov­er­nor Philip Lowe said in a state­ment. “Fur­ther progress in re­duc­ing un­em­ploy­ment and hav­ing inflation re­turn to tar­get is ex­pected, although this progress is likely to be grad­ual.”

The RBA has re­mained pos­i­tive about the Aus­tralian econ­omy and the strength­en­ing labour mar­ket, but ap­pears to be keep­ing a closer watch on sev­eral risks, in­clud­ing low inflation, weak wages growth and uncer­tainty over con­sumer spend­ing.

The hous­ing mar­ket is ex­pe­ri­enc­ing a down­turn af­ter sev­eral boom years, with prices in Novem­ber fall­ing at their fastest pace since the global fi­nan­cial cri­sis, ac­cord­ing to lead­ing prop­erty data provider CoreLogic.

Mar­ket an­a­lysts ex­pect the bank to hold rates for some time to come. “There’s noth­ing on the agenda which is go­ing to force the RBA’s hand at this stage, so I think the up­side that we’re see­ing in the labour num­bers is prob­a­bly be­ing off­set to a large ex­tent in hous­ing and (tighter) credit,” JP Mor­gan economist Tom Kennedy told AFP. “It means that the path of least re­sis­tance is prob­a­bly for the cash rate to re­main at 1.50 per cent.”

The RBA de­ci­sion comes a day be­fore the re­lease of thirdquar­ter eco­nomic growth fig­ures, with ex­pec­ta­tions for a slow­down af­ter a strong first half of the year owing to slow­ing house­hold con­sump­tion. An­a­lysts are tip­ping ex­pan­sion of 0.5 per cent for the three months, tak­ing the an­nual rate of growth to 3.2 per cent, com­pared with the cur­rent reading of 3.4 per cent.

– Reuters file pic­ture

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