September RBA meeting sees rates kept on hold

With the Reserve Bank sidelined on domestic and worldwide economic woes, official rates have been kept on hold.

Sydney’s meeting on the 6^th September saw the RBA’s board of directors came to an agreement to keep the cash rate unchanged at 4.75 per cent.

It was the ten-month anniversary of last year’s shock rise on Melbourne Cup Day, and the longest stretch of a stable cash rate in four years.

The volatility in worldwide markets and the likelihood of continuing debt and economic problems in the US and Europe made the possibility of a rate increase almost non-existent.

The decision followed huge overnight falls in Europe which wiped billions of dollars off the Australian share market.

With consumer confidence at a record low, struggling tourism and manufacturing industries, and poor retail sales, the decision also came after months of uninspiring economic data.

In addition the unemployment rate has risen to 5.1 per cent, whilst a decrease in the number of job advertisements being published is evident.

Building approvals have also fallen, with the construction industry suffering due to low levels of activity.

RBA have said that the near-term growth outlook still looks weaker than what was expected a few months ago, with conditions in global financial markets very unsettled over recent weeks. There is continuing uncertainty about both the resolution of sovereign debt problems and the prospects for economic growth in Europe and the United States.

This uncertainty and financial volatility has severely reduced confidence, and both firms and households in major countries are likely to behave with more caution. This will result in tighter than usual financial conditions.

Experts predict that rates will remain on hold until the end of the year.