Despite speculation about a cash rate cut, the Reserve Bank this week held the cash rate at 1.5% – marking 30 consecutive months without change.
The RBA is forecasting a pick-up in wages growth and has signalled there is no immediate case for a rate cut, as the rebounding resources sector and an increase in infrastructure spending drive the economy.
“The strong employment growth over the past year or so has led to some pick-up in wages growth, which is a welcome development,” RBA governor Philip Lowe says. “Some further lift in wages growth is expected, although this is likely to be a gradual process.”
The RBA is pressuring the banks to do the heavy lifting on interest rates, pointing out that mortgage rates remain largely unchanged despite lower bank funding costs.
In the latest Finder Cash Rate Survey, 75% of economists correctly forecast a hold of the cash rate this week. But Graham Cooke, insights manager at Finder, says the rate will be eased soon. “At this stage, most of our experts are predicting at least one cut by August and many expect another drop after that – a cash rate of 1% is in sight,” Cooke says.