The Reserve Bank of Australia has left interest rates on hold at 1.5%
Peter Overton: Good afternoon everyone, I’m Peter Overton.
We’re standing by to bring you the latest breaking news on interest rates.
The Reserve Bank will announce its decision any moment now.
We’ll find out, as you do, when we get it from our business screen.
Our finance editor, Ross Greenwood, is with me.
Ross, I suppose what’s interesting for all of this is the bank’s, the big banks, seem to be running their own race now and just ignoring the RBA when it comes to lifting rates?
Ross: There is no doubt about because though the Reserve Bank is expected to keep rates on hold for the rest of this year, and maybe in the next year as well.
There’s a situation here – we’ll there you go – you’ve got me on hold from the Reserve Bank right now.
We’re seeing some of those decisions coming through, and we’ll bring a few of those.
Now that’s not unexpected, but it’s what the banks do, as you say Peter.
In the past month, the banks have been raising interest rates.
Now, this is also about that the regulators APRA and also the Reserve Bank Plus also ASIC try to cool down property markets.
We saw yesterday property prices over the past 12 months in Sydney and Melbourne have continued to run away.
There’s concern about interest-only loans, there’s also concern about the amount of lending the banks are handing out at these very high property prices.
That’s the reason why the reserve bank now is kind of stuck in what it does with interest rates – it can’t cut rates which would stimulate the markets, it can’t raise rates because that also could trigger the banks to raise rates even further and harm those people with the property.
Peter: So that’s the deal isn’t it? The Reserve Bank’s saying ‘well, we’re ignoring you are RBA, we’ll raise rates when we feel like it’ but as soon as the RBA says ‘we’re going to lift rates’ – they’re going to go ‘well we’re back on the RBA’s team now, we’re going to lift rates as well’
Ross: Oh, 100% there is no question that that’s what would happen if the Reserve Bank were to raise rates tomorrow, the big banks would certainly come in again.
But you know is this going to be good for those people who have recently taken on properties, acquired significant debts, because we’re now in an environment where rates, eventually, are going to rise – and in fact about a third of economists now thinking in 12 months time the rates will be higher than today.
Peter: It will be interesting come Scott Morrison’s budget to see if he has anything in his plans to try and cool down the market, whether it’s stamp duty issues, or negative gearing, or whatever…
Ross: Because, like the regulators, he’s got to try and cool the market without actually making it go pop…
Peter: Ross, we could talk all afternoon but we’ve gotta keep moving -thank you.
The RBA has left the official cash rate on hold at 1.5 per cent