This was published 11 years ago
Five things you need to know about the RBA verdict
Five things you need to know about today's Reserve Bank decision to leave its key cash rate unchanged at 3.5 per cent.
1. A red face for Market Economics blogger Stephen Koukoulas. All other 27 economists in a Bloomberg survey tipped the RBA would stay put. Investors, meanwhile, don't expect an interest rate cut until October.
2. While steady today, the cash rate remains just 50 basis points - or two typical rate moves - above its record low during the Global Financial Crisis. That may be low by Australian standards but the cash rate is much higher than most advanced economies.
Equivalent rates include:
Japan 0.1 per cent
US 0.25 per cent
UK 0.5 per cent
Eurozone 0.75 per cent
Canada 1 per cent
New Zealand 2.5 per cent
3. Since the RBA began cutting interest rates in November, it has lowered the cash rate by 125 basis points. Of that total, lenders have passed on about 100 basis points - or one percentage point - for borrowers with variable mortgage rates. That reduction equates to about $196 in lower monthly repayments on a typical $300,000, 25-year mortgage.
4. The effects of rate cuts in November and December, and then May and June, are now flowing into the wider economy - and that's part of the reason why the RBA stayed put today.
June retail sales rose by 1 per cent - more than expected - with the increase also helped by a round of government handouts for schooling and the carbon tax. Nationwide, house prices are also rising again, with a 0.6 per cent increase in July adding to the 1 per cent rise in June, according to RP Data-Rismark. Auction clearance rates hit a two-year high in Sydney last weekend, rising to 68 per cent, while they remained flat in Melbourne. Jobs figures on Thursday will tell us if the RBA is overly confident about the economy
5. The halt in RBA cuts has helped add to the allure of the dollar - because of those relatively high interest rates.
Since the June rate cut, the dollar has risen from 99 US cents to $US1.06 in recent trading - the highest since mid-March. Over that period, the dollar has been the best performer against major 16 currencies ranked by Bloomberg.
The rally in the currency - even as some key commodity prices have retreated - has prompted some leading economists to call for the RBA to intervene in foreign exchange markets to sell Aussie dollars and force its value down. Another rate cut would deliver a similar result but it's clear from today the RBA is not inclined to take such a step for now.
Still, the dollar may emerge as a key discussion point after today's rates decision. RBA governor Glenn Stevens said: "The exchange rate...has remained high, despite the observed decline in the terms of trade and the weaker global outlook."
Look out for more debate about whether the RBA should try to stop the dollar getting stronger.