Housing Confidence Keeps Rates on Hold

Ongoing confidence in the housing market and falling unemployment
are the likely reasons behind the Reserve Bank’s decision to leave the
official cash rate on hold this week.

Mortgage Choice CEO Susan Mitchell says the nation’s improving
unemployment – which fell to 5.1% in December – was a reason for
the RBA to defer a rate cut. The CPI also rose 1.8% in 2019, which was
better than expected.

“Another reason the RBA may have decided to hold the cash rate
this month is dwindling consumer confidence,” she says. “The latest
Westpac-Melbourne Institute Index of Consumer Sentiment revealed that consumer confidence fell over January due in part to the devastating bushfires.

“The low level of confidence is consistent with generally lacklustre reports on consumer spending and Board members. But, pleasingly, the Index points to ongoing confidence in the housing market.”

At its December Board meeting, the RBA Board said it was prepared to ease monetary policy further, suggesting a cash rate cut is only a matter of time.