6th May 2014: Cash rate on hold for eight consecutive month

The Reserve Bank decided to keep the cash rate on hold for the eighth consecutive month at its meeting today.

Financial conditions have remained accommodative and banks are well placed to provide funding to credit worthy borrowers. The inflation rate has remained stable at 2.9 per cent, which is within the target range of 2-3 per cent.

Reserve Bank governor Glen Stevens reiterated that while housing prices have increased significantly over the past year, the decline in the exchange rate has helped to achieve a balanced level of growth in the economy. Domestic economic conditions have improved, with credit growth and housing prices increasing as a result of the sustained stable inflation and interest rates.­­

Property analysts at the Real Estate Institute of Victoria (REIV) have reported a easing in housing value appreciation in the first quarter of 2014, which is a welcome result after such robust growth levels since June 2012.

The low interest rates have intensified competition amongst financial institutions and mortgage costs have fallen as banks compete to provide funding in the current environment of healthy buyer activity. The Reserve Bank reported that moderate growth is occurring in consumer demand and the board foreshadows a strong expansion in housing construction in the near future.

The board judged that a stable inflation rate is the appropriate method to foster sustainable growth in demand and inflation. Today's decision marks the most sustained period of monetary policy stimulus in 15 years.

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