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Interest rates to remain at 60 year low

August 5th 2014

At its August meeting today, the Reserve Bank has decided to keep the cash rate on hold at 2.5 per cent for the twelfth consecutive month, continuing with its steady approach to monetary policy.

Growth in the global economy is continuing at a moderate rate and financial conditions in Australia remain accommodative. While the cash rate has remained at its 60 year low over the past year, interest rates have continued to fall, with the major banks cutting fixed rates to below 5 per cent. A strong expansion in housing construction, combined with a robust winter property market has continued the steady increase in home values across the country. Melbourne has experienced a 16.7 per cent increase in home values, with a median house price of $658,000 recorded by the REIV in the June quarter.

Growth in wages is expected to remain at modest levels, which should keep inflation within the economic goal of 2-3 per cent for the coming two years.

Reserve Bank Governor, Glenn Stevens, reports that continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. He considers that present indicators suggest stability in interest rates is the most prudent way to foster growth.

Overall, long-term interest rates and risk spreads remain low, indicating a continued period of growth in consumer demand. Banks continue to be well placed to provide funding to credit-worthy borrowers, making it an ideal time to grow your property portfolio.