Published on November 03, 2015

Today's interest rate cut deferred

On the day when the nation stopped to watch a horse race, the Reserve Bank of Australia (RBA) left interest rates on hold.

In my opinion the focus of the RBA should be on stimulating consumer demand and business confidence, not on a dampening of the housing market, which has already seen the heat start to come out of it in recent months as the Sydney and Melbourne property markets pull back from the crazy conditions of the past three plus years.

The mining boom has past, demand out of China subsiding, the manufacturing sector has struggled for years and economic growth is weaker generally. Inflation is also low, the very thing monetary policy (interest rate movements) are designed control.

Add to all this, the recent decision by our big four banks to ‘gone it alone’ and increase interest rates outside any RBA cash rate movement and there was a strong case for a Melbourne Cup Day rate cut.

Perhaps the RBA has looked to the falling Australian dollar and is waiting to see the impact that has on stimulating exports and tourism.

So while I saw a stronger argument for an interest rate cut today I was not surprised that the RBA didn't. I have repeatedly pointed out how ultra slow the RBA is at responding to economic conditions supporting a rate cut, while being the exact opposite (even 'trigger happy') when there is something of a case to put them up.

All in all, I would be surprised if the next official interest rate movement is not down and if such a decision is not made in the near future... stay tuned.

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