The Reserve Bank is unlikely to change the cash rate in the foreseeable future, according to the minutes from its monthly monetary policy meeting.
The minutes from the February 5 meeting, which were released today, said that board members would continue to keep a close eye on economic conditions and interest rates.
“However, given that further progress in reducing unemployment and lifting inflation was a reasonable expectation, members agreed that there was not a strong case for a near-term adjustment in monetary policy,” the minutes said.
“Rather, they assessed that it would be appropriate to hold the cash rate steady and for the bank to be a source of stability and confidence while further progress unfolds.
“Members judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”
The cash rate has been at a record-low setting of 1.50 per cent since August 2016.
Pace of housing construction slowing
Real estate was one of the themes of the meeting, with board members concluding that property investment was likely to have been close to its peak in the second half of 2018.
“Although there was still a large pipeline of residential work to be done and few signs that projects already under way were being cancelled, it had become more difficult for new apartment projects to obtain finance, and building approvals were the lowest they had been for five years,” the minutes said.
“As a result, dwelling investment was expected to remain at a high level in the near term, but then to decline faster than previously expected. Members noted the uncertainty about the extent and speed of the downturn in the dwelling investment cycle.
Board members also noted that rental rates were rising slowly, and would probably keep doing so for the foreseeable future.
“Rent inflation had started to trend lower in Sydney, where the rental vacancy rate had risen and was expected to rise further in the near term as more supply becomes available,” according to the minutes.
“Rents in Perth had fallen further, although the pace of deflation had eased. Inflation in the cost of new housing construction had trended lower, despite the high level of dwelling investment.”