Cash rate stays low, winning praise from HIA

The Reserve Bank of Australia (RBA) board met on September 2 and decided for the 13 month in a row that keeping the cash rate low was a prudent option. 

Citing predicted below-trend growth for the Australian economy over the next year, increased unemployment and a decline in the growth of wages, RBA Governor Glenn Stevens emphasised the importance of monetary policy in assisting the Australian economy. 

"In the board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target," he said in a September 2 statement. 

"On present indications, the most prudent course is likely to be a period of stability in interest rates."

The Housing Industry Association (HIA) reacted positively to the news, noting that the decision to keep the official cash rate at a historically low level would be helpful for those working with concrete pumps and other building equipment. 

"That interest rate outlook is supportive of healthy levels of new residential construction activity throughout 2014/15, HIA Chief Economist Harley Dale said in a September 2 release. 

"That is a tick in the box for the Australian economy – new housing is a clear bright spot for domestic demand and it needs to continue to shine."

Mr Dale went on to say that domestic demand needed to be strengthened, particularly in the renovation sector of residential construction. While other segments of residential building had indicated they were back in recovery, renovations had not made much progress from the decade low it had earlier experienced. 

This is currently one of the longest periods of interest rate stability in twenty years. The 14 months of a 2.5 per cent cash rate has equalled the period from March 2005 to April 2006, and is beaten by only four others. The longest period of interest rate stability lasted 19 months from, December 1994 to June 1996.