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Interest Rate Announcement -Still on Hold

•   Rates remain on hold in a mixed economic landscape
• Unemployment rate falls as other factors continue to improve gradually
• House price growth moderating
• Outlook remains for steady rates as budget impact looms

The   Reserve Bank has decided to again leave official interest rates on hold at   its regular monthly meeting today. Rates have now been steady since the   decision by the Bank in August last year to cut rates to a 60 year low of 2.5   percent.

The   national economy continues to provide positive signs of gradual overall   improvement although outcomes remains mixed between regions and sectors.

The   national monthly seasonally-adjusted unemployment rate fell from 6.1 percent   to 5.8 percent over March – the first drop in the rate for 6 months. The   falling unemployment rate translated into jobs growth of 18,100 over the   month.

Steady   rises continue in retail sales and construction with export activity also   improving. The stockmarket continues to rise with the dollar now settling   after its recent upward trajectory.

Recent   inflation data reported that prices growth declined over the March quarter   and remains well within the Reserve Banks preferred range.

Although   official rates remain on hold, mortgage costs continue to fall as competition   amongst banks for market share intensifies in a generally positive   environment for home buyer activity in most housing markets.

House   price growth however as expected is generally moderating as the significant   stimulatory impact on housing markets of last year’s rate cuts diminishes.

With   the upcoming federal budget expected to tightly constrain fiscal policy,   consequential downstream impacts on economic activity is another factor   indicating that the near term- outlook for interest rate settings remains   neutral.

“The   Reserve Bank has predictably decided to leave official interest rates at   current settings over May. Although recent economic data has been generally   positive with falling unemployment and steady jobs growth reflecting   improvements in retail sales, construction and exports, outcomes remain mixed   between states and regions.

Although   positive signs continue to emerge on the economy overall, official interest   rates are likely to remain on hold for the foreseeable future, particularly with   a number of states continuing to report subdued job markets.

The   constraints on fiscal policy from the upcoming federal budget together with   low and falling inflation, weak incomes growth and moderating house price   growth will also act to keep the Bank on the sidelines.”, says Dr Andrew   Wilson Senior Economist for Australian Property Monitors.

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