The Reserve Bank has dashed the hopes of the nation’s mortgage holders by leaving official interest rates on hold.
Following its traditional Melbourne Cup Day meeting today, the Reserve left the cash rate at 3.25 per cent. It is the first time since 2005 that it has not altered the cash rate on Melbourne Cup Day.
Governor Glenn Stevens said interest rates had already been cut but those reductions were yet to fully work through the economy.
He said there were already signs those lower cuts were starting to work.
“Business demand for external funding has increased this year, the housing market has strengthened and share prices have risen in line with markets overseas,” he said.
“Further effects of actions already taken to ease monetary policy can be expected over time.
“The board will continue to monitor those effects, together with information about the various other factors affecting the outlook for growth and inflation.
“At today’s meeting, with prices data slightly higher than expected and recent information on the world economy slightly more positive, the board judged that the stance of monetary policy was appropriate for the time being.”
Mr Stevens said that while commodity prices had fallen significantly since near-record highs earlier in the year, they had been mixed over recent months.
Financial markets were improving, borrowing rates for countries such as Australia were very low and there positive signs ahead.
“Some of the consumption strength in the first half of 2012 was temporary, but there have been some signs of ongoing growth, though a return to very strong growth in consumption is unlikely,” he said.
“While investment in dwellings has been subdued for some time, over recent months there have been some indications of a prospective improvement.”
The decision follows new figures from the Australian Bureau of Statistics showing a 0.3 per cent lift in house prices across the nation through the September quarter.
House prices in Perth were up by 1.8 per cent last quarter to be 4.4 per cent higher through the past year.\
It was the single best quarterly increase in Perth prices since March 2010, and was driven by a general lift in prices for homes under the $700,000 mark.
Ahead of the Reserve Bank board meeting, where interest rates were tipped to be left on hold, the ABS reported its house price index for Perth is up by 4.4 per cent over the past 12 months.
Prices fell by 1.1 per cent in Canberra and by 0.6 per cent in Adelaide while they were up in all other capitals.
Over the past year, Darwin continues to enjoy the strongest market with prices up by 8.2 per cent.
It is the fourth consecutive quarterly increase for Perth prices.
The bureau reported the lift in prices through the September quarter was driven by clusters of houses with median prices below $700,000.
Despite the lift, prices have now only got back to where they were in the December quarter of 2010.