With the election result still in limbo, Australia’s AAA rating apparently under threat and the ramifications of Brexit on the domestic market not yet fully known, the Reserve Bank had no option but to leave interest rates on hold.
However this doesn’t mean the chance of another cut in coming months is off the table.
Regardless of who wins Government, there seems little in our immediate economic future to indicate a major change to the status quo. Affordability will remain a concern, particularly for first home buyers, while key indicators like inflation, wages growth, consumer sentiment and unemployment all appear relatively steady.
While some might argue the case for a rate cut based on these factors, the Reserve Bank was always expected to stay the course given the broader economic volatility. However the full extent of the Brexit shock and the associated uncertainty in global markets has not yet been determined, particularly in a domestic sense.
Continued flat income growth and low inflation could see the RBA pull the trigger on another rate cut sooner rather than later.