Interest rates steady over November as economic uncertainty prevails 

  • Official rates remain steady  
  • Economic uncertainty prevails although recent indicators subdued
  • Spring housing markets remain solid but price growth now flattening
  • Rates likely at current levels into 2015 but a cut possible if jobless keep rising

The Reserve Bank announced today that official interest rates would remain at the current level over the month of November.

Interest rates have been at the 60-year low of 2.5 percent for 15 consecutive months, the longest steady sequence since 2003.

This month’s economic data remains both underwhelming and subdued with the September national jobless rate increasing to 6.1 percent – the highest rate recorded since July 2003.

Home building approvals decreased sharply over September as growth in house approvals continues to decline with unit approvals accounting for the overall increase in planned dwelling construction this year.    

The Australian dollar remains relatively fixed at its level of recent months although an improved outlook for the US economy will act to push the local currency downwards in line with policymaker’s objectives. Concerns however continue to increase over the outlook for the global economy generally.

The stockmarket has experienced a roller coaster ride over October with a solid recovery late in the month following a sharp early month sell-off. Flat retail sales over August add to the overall subdued recent performance of the national economy. 

Spring housing markets continue to perform solidly overall although the Sydney market clearly remains a standout. Latest data from the Domain Group reports that house prices fell in most capital cities over the September quarter. The low mortgage rate driver of market activity driving prices growth over the past year is generally diminishing in the face of modest incomes and profits growth from continuing underperforming local economies.

With house price growth now moderating within an overall flat economic environment, interest rates are set to remain on hold through to 2015. A continuing deterioration in the jobless rate however will increase the likelihood of a rate cut sooner rather than later in the new year.

Dr Andrew Wilson is senior economist for the Domain Group and a member of the AURIN housing market experts group

 Twitter@DocAndrewWilson