The Reserve Bank of Australia (RBA) kept the interest rate on hold last night and have suggested there is unlikely to be any further movements in the short term. RBA Governor Philip Lowe was keen to suggest that any further cuts to the rate would not be in the interest of the consumer, even though it would make borrowing cheaper; with the emphasis on gently raising interest rates over the next few years.
The economy in Australia isn’t really growing despite the Aussie Dollar experiencing major strength, especially against Sterling in the last year. However, the RBA seem to have managed to get a hold on the rising house prices that were concerning economists in the nation. In Sydney there was an enormous surge in buying houses as the RBA have cut rates by 3.25% since 2011, taking the rate from just under 5% to 1.5%.
Where to next for AUD exchange rates?
There will be more Australian economic data this week on Thursday and Friday. In the early hours of Thursday we will see the Trade Balance data and Retail Sales figures, both of which are important indicators of current economic conditions. This will be followed by New Home Loans and Investment Lending on Friday morning.
The housing related data is very significant currently with the latest emphasis on controlling property prices. Whilst the RBA have managed to control property prices that might mean there will be an increase in supply. If the market does start to drop and prices start to decrease encouraging more sales then there could be a relapse of the rising value.
If the Australian economy does start to pick up there could be optimism of interest rate hikes in the next year. The RBA have been vocal in announcing they want the interest rate to return to 3.5% in the near future, so rates will return to more common levels.