Reserve Bank in no rush to hike interest rates

The Reserve Bank has used its pre-Christmas board meeting to leave official interest rates on hold, with no sign it is in a hurry to change them.

Following its final meeting of the year, the board left the cash rate at 1.5 per cent. It last changed rates in August 2016 when it sliced them to the current level.

The last rate increase was in November 2010.

Governor Philip Lowe said the jobs market remained positive with a further reduction in the jobless rate “likely”.

“The vacancy rate is high and there are reports of skills shortages in some areas. The stronger labour market has led to some pick-up in wages growth, which is a welcome development,” he said.

“The improvement in the economy should see some further lift in wages growth over time, although this is still expected to be a gradual process.”

The RBA still believes inflation will lift gradually over the next two years, despite the monthly measure of inflation from TD Securities suggesting it could drop through the final quarter of 2018.

There have been growing concerns about the strength of the property market and what this may do to consumers.

But Dr Lowe suggested the bank was comfortable with the current situation.

“Credit conditions for some borrowers are tighter than they have been for some time, with some lenders having a reduced appetite to lend,” he said.

“The demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed.

“Mortgage rates remain low, with competition strongest for borrowers of high-credit quality.”