July 2013 Interest Rate on hold

RBA Building

The RBA’s decision this month (July 2013) to keep interests rates on hold brought with it both a collective sigh of relief amongst mortgage holders and a dissatisfied grunt from those with term deposits, but what were the reasons behind this decision to hold? Why didn’t the RBA raise or lower interest rates this month? The RBA has cited a few main reasons that led to their decision, these are discussed below.

Reasons behind the interest rate hold

Firstly the global financial market has been pretty calm as of late, with inflation levels staying moderate. Commodity prices have declined though are still quite high, and this is countered by the below average growth in the overall global economy. All in all, the global economy is quite balanced at the moment, and thus there is no substantial need for an increase or decrease in Australia’s interest rates based on global conditions.

The Australian economy has also been quite boring lately, with no exciting rises or scary decreases in any of the main indicators. That being said there has still been some slight movements, but nothing to make the RBA move on interest rate figures.

  • Overall economic growth in Australia is a little below the usual trend, this is due to the continuing decrease in the levels of mining investment.
  • The unemployment level has also increased over the last 12 months, but only slightly.
  • The cost of labour is still growing, albeit a little more moderately.
  • Inflation is on target for the moment, it may decrease.
  • Overall borrowing has stayed subdued, however there are indications of increasing demand from households.
  • The AUD is predicted to fall by up to a further 10%, which means economic growth should rise.

So what does that all mean?

According to the experts, it means for now we are pretty safe, conditions at the moment are quite balanced. There are a few hints in these figures suggesting that interest rates may rise in the future, such as the increase in economic growth and activity from the drop in the AUD, and the chance that households will start borrowing more funds. However on the other hand there are hints that inflation may decrease, due to low consumer activity, and thus interest rates could be lowered again.

Overall it looks like things might stay regular for a while, although if interest rates were to change, there is slightly more chance they will drop rather than increase. But these are never sure things to predict. For now interest rates have been held at 2.75%, that’s what we know for sure.

How does it affect you?

This is a very low interest rate for Australia to have, and means that if you were looking to buy a home, now could be a good time to lock in a great rate. Talk to a qualified financial advisor if you'd to discuss your options and make a plan.

You can also get a quick overview of some current Home Loans by using our comparison tool to compare home loans.

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