Rates Remain on Hold Through 2014

The Reserve Bank of Australia has left the official cash rate on hold at 2.50% pa for December, which will mark an entire full calendar year with no change. This was determined by a majority of economists and expert which pushed for the rate to remain the same. 2015 has increased likelihood of a cash rate shift. This would be driven by falling housing market and slower growth in China and foreign economies. Although more than half of experts have strong conviction that the housing market may still grow. The central bank will have kept interest rates at record lows for a 17th months straight by the end of December.

Rates were originally cut with the winding back of mining investment and declining terms of trade. By keeping the interest rates low, the housing market was able to flourish by allowing buyers more access to credit. Furthermore, approvals to build new homes in Australia surged 11.4% in October, completely reversing a big fall in September and keeping the annualised pace of approvals near record peaks.

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