RBA Rates Decision – August 2012

The RBA board met today at their August Board Meeting and decided to leave the cash rate at the current level – 3.5%.  Even though the recent inflation data released indicates that inflation is no problem at all.  In fact, it is currently sitting under the target range of 2-3%, which could have given them justification for a further rate cut this month.

At a recent presentation RBA Governor Mr Glenn Stevens painted a very promising picture of how well the Australian economy is traveling and how well it is positioned should further deterioration occur in Europe or globally.  Noting we would not be immune to any major downturn, but this was scoped in our monetary and fiscal policies to assist with minimising the impact of any such event.

Although our Olympics campaign hasn’t gone completely to script, it’s clear we would be serious gold medal contenders in the developed world economic performance race.  And there is evidence that the recent rate cuts are having some impact on the overall economy, notably the housing sector as there are early indications that first home buyers are starting to think it is time to enter the market.

The flow on effect of buying a home to the economy is sizable, from increased government revenues to trade work to consumer spending and overall GDP performance, so if the RBA does get the housing sector moving it is only good news!

I’m still hopeful of one further rate cut this calendar year, which is less optimistic than some economic commentators, as I think the RBA will be conscious of not creating a false economy by making cash too cheap, but they’d also love to help our export market by lowering the Aussie Dollar.

 

(Those people reading this should be reminded this is an opinion comment by Ben Kingsley, and should not be used when making decision about financial matters without seeking further clarification and understanding of your own personal circumstances. This article is not advice you should rely upon. I recommend you speak to one of our licensed professionals before taking any action with your financial affairs.)