Cash rate

Cash rate not expected to lift for three years

PHOTO:  Reserve Bank of Australia (RBA) 

After a year of historic decreases, the Reserve Bank of Australia (RBA) Board has decided to keep the cash rate on hold at a record low of 0.1 per cent at its December meeting, with the expectation that rate is unlikely to lift for the next three years.

“Given the outlook for both employment and inflation, monetary and fiscal support will be required for some time,” RBA Governor Philip Rowe said.

“For its part, the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.

“For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market.

“Given the outlook, the Board is not expecting to increase the cash rate for at least three years. “

CoreLogic’s Head of Research Tim Lawless has labelled it a ‘wait and see’ policy.

“From a housing market perspective, home buyers are clearly responding to the unprecedented levels of stimulus available,” Mr Lawless wrote.

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