RBA interest rates in May: change before the budget announcement?
Article by Kelly Emmerton
The RBA official cash rate has held steady at 1.50% since August, and it’s likely to stay there for another month in the lead up to the May Budget announcement.
With three big banks due to announce profits within the next week or so, and more importantly, with Treasurer Scott Morrison set to announce his 2017 budget on May 9, it's unlikely the Reserve Bank will want to shake things up with a rate change.
And there’s little reason that it should.
At his pre-budget address on Thursday, Morrison had an overall optimistic outlook for growth in Australia’s economy, despite the fact that wage growth has been stagnant for some time now and unemployment remains around 5.6-5.9%.
While the RBA Board will have to consider these factors, other areas of concern are beginning to look more positive.
Since the April Reserve Bank board meeting, inflation rose to 2.1% in the March quarter of 2017. This is the highest it’s been since the September 2014 quarter and puts it back within the RBA’s desired band of 2-3%.
Also since the last meeting, regulating bodies APRA and ASIC took action to reign in an increasingly competitive property market with further restrictions on interest-only and investment home loans.
This month’s budget announcement, which is expected to address housing affordability but leave negative gearing and capital gains tax concessions well alone, is the big factor in keeping the RBA from making a move on interest rates.
“The RBA won’t want to do anything too hastily,” says Mozo Data Manager Peter Marshall.
“There’s no real motivation for them to make a change this close to the budget announcement, so it’s likely they’ll leave the cash rate as is and wait to see what Morrison has up his sleeve.”
Remember to check our RBA interest rates page tomorrow to find out what the Reserve Bank Governor Philip Lowe said, and how it will affect your savings and home loan.