RBA leaves rate unchanged, although economic conditions still weak

Contrary to popular opinion, the Reserve Bank left rates unchanged this week. Despite the weakened global economy and contracting spending, the move shows confidence in Australian's financial system, a sentiment echoed in the bank's official announcement.

"The Australian financial system remains strong and the monetary policy transmission process is working to deliver large reductions in interest rates to end borrowers," said Glenn Stevens, Governer Monetary Policy.

He continued, "Nonetheless, economic conditions are clearly weak, and given the speed and scale of the global economic deterioration and its effect on confidence, weak conditions are likely to continue in the near term. Inflation is likely to decline over time."

Malcolm Edey, Assistant Governor echoed these words in an address to the Australian Industry Group Annual Economic Forum "There's no doubt that world economic conditions deteriorated sharply in the final months of last year. Governments and central banks around the world have taken actions to support growth in response to these events, and to assist their financial sectors. But these measures will take time to work, and 2009 is looking to be a very tough year for the global economy.

Australia is being affected by these events. The international deterioration has been so abrupt that it won't be possible to avoid some short-term weakness here.

However, in the face of both these statements of a prediction of tougher times to come, the Real Estate Institute of Australia warned that significant cuts to official interest rates may not continue. 

Although Noel Dyett, President of REIA advised home buyers that "current availability of the Boost to the FHOG, recent interest rate cuts and improving housing affordability makes now a good time to enter the housing market for those who are in a position to purchase a home".