The Reserve Bank announced yesterday it will leave interest rates on hold at 1.50 per cent, marking the 16th consecutive month the cash rate has been at the historic low.

REINSW President Leanne Pilkington said interest rates are likely to remain steady in 2018. 

“The OECD has recently signalled that the winds of change in the Australian economy may be preparing to blow, and that a rate rise may come sooner than previously thought. Even so, this (rate rise) would be 12 months away,” she said.
 
“With the heat gone from the housing market, and with wages, unemployment and inflation steady, there’s little impetus for the RBA to tinker with interest rates in the near term," said Pilkington.

A statement from Cameron Kusher and Tim Lawless, CoreLogic said rate rises "remain some way off".

Macroprudential policies have resulted in tighter credit policies, making lending conditions tougher without rate rises, particularly for investors, and the housing market is slowing, they said. 

CoreLogic data shows the Sydney housing market has slowed from 17.1 per cent annual growth in May, to only 5.0 per cent growth at the end of June. Property values across the combined capital cities fell by 0.1% in November.

Kusher and Lawless wrote the record level of household debt, which is mainly concentrated in residential mortgages, means higher interest rates would put a strain on households, which in many circumstances are already stretched, as indicated by weak levels of retail spending.

Inflation remains below the Reserve Bank’s target range, they said, further negating the necessity of higher interest rates.

"High levels of household debt along with stretched housing affordability and an apparent slowdown in retail spending, from our perspective suggests that any increases to the cash rate remain some way off," wrote Kusher and Lawless.

Mortgage Choice chief executive officer John Flavell said, "Interest rates are currently sitting at record lows and will remain lower for longer." 

“The latest data would suggest the Australian economy is performing relatively well at the moment and doesn’t need to be helped or hindered by a change to the cash rate,” he said.

“Property price growth has stagnated across Australia," he said.

Consumer sentiment has taken "a bit of a tumble" he said, and inflation is currently sitting at 1.8 per cent, just below the Reserve Bank’s target range of 2-3 per cent.

“On a positive note, business conditions hit a new high in October, according to National Australia Bank’s latest monthly business survey," said Flavell, noting the strength in business conditions was felt across most industries.

But Flavell cautioned that it is only a matter of time before the Reserve Bank does lift the cash rate.

“I believe a cash rate rise is inevitable, it is now just a question of when it will happen,” he said.

"There is little basis for expecting interest rate rises over the short term," said Shane Garrett, HIA Senior Economist. 

"Price inflation is weak, wages growth is close to a 20-year low, and the pace of economic expansion is sub-par."

The Reserve Bank "must keep interest rates low at this time", he said.

Read more about interest rates:

Interest rates on hold: what does it mean for the property market?

How to prepare for higher interest rates

One in five Australian households will struggle if interest rates rise 0.5%