RBA keeps rates steady

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The Reserve Bank of Australia (RBA) met yesterday the 6th of April 2021 to discuss the current economic climate and what to do with the cash rate.

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From the RBA meeting it came as no surprise that they decided to keep the cash rate at the historically low 10 basis points (0.10%), but what was interesting is how long the RBA thinks it will take before they reach a point where a rise needs to be considered. 

The RBA doesn’t expect conditions that constitute a rate rise to be met until 2024.

They outlined a few things that they are looking for before pulling the trigger on a rise, and surprisingly are not concerned to much around the heat of the property market.

Unemployment has come back down to 5.8% which is its pre-covid level, however the RBA want to see that get even tighter which will then in turn put pressure on wage growth.

Inflation is hovering below 2%, which the RBA want to target between 2-3%, and stated that though they saw GDP up 3.1% for the December qtr signaling a return to consumer spending, inflation will remain subdued while wages are stale.

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We have seen the 10 year bond yield start to rise, which in turn will put pressure on banks, however with the RBA purchasing 3 year bonds at the target cash rate, it might be a little while before we see mortgage rates back over 2%.

On a positive note, surging house prices has seen people move into a positive wealth position, and their net wealth overall reach $200,000USD per person, making Australia one of the wealthiest countries (per capita).

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