Being the first Tuesday of the month again – don’t they come around quickly! – the Reserve Bank board met again today to decide whether or not to raise the cash rate. Before the meeting, pretty much everybody in financial circles had agreed that there was no chance at all they would raise the rate (and last time everybody said that, they surprised us and did it!). Fortunately today the general punters were right, and the Reserve Bank has decided to allow the cash rate to remain unchanged at 4.75 per cent.
The reasons they gave for this decision include the fact that the global economy is continuing to improve and expand as a whole, this improvement is still within reasonable limits, and there is no cause to think that our economy is about to go crazy under any international influence. On top of that, in the specific case of Australia, our economy is continuing to grow but our spending is still relatively cautious and the rate at which we are saving money is higher than it has been on average in recent years. At the same time, inflation is relatively average – except, as the Reserve Bank pointed out, for some fresh fruit and vegetable prices which are overinflated after storm damage – so there is no need to increase the interest rate at this moment.
The media is interpreting the Reserve Bank decision as their acknowledgement that we have what they are referring to as a “two speed economy” – in other words, our resources boom is going full steam ahead, with exports going crazy and new mining ventures continuing to start up – but our retail sector is closer to stagnant, with many Australians reluctant to spend too much in the current economic climate, and no doubt this is not helped by the numerous natural disasters which have hit various parts of the country since the beginning of the year.
As for me, I’m just glad that my interest repayments will be remaining stable a little longer. I’m fully aware that won’t happen forever but just for now, they seem manageable and I’m happy that they won’t be increasing for at least another month – unless my bank decides to do something dastardly!