Following its September meeting this afternoon, the Reserve Bank of Australia has announced that the official cash rate will remain on hold at 1.50% pa. This is on the back of their decision to cut to the historic low rate last month. The meeting was the last to be chaired by current Governor Glenn Stevens. After a decade as the country’s top banker, he will stand down and be replaced by his deputy Philip Lowe.
It is an interesting time for Lowe to be taking the reins. When Stevens first took up the role, interest rates were around 6% which is pretty close to the long term average. He had the means to increase or decrease as he saw fit, evidenced by the 7.25% pa rates seen in 2008. Whilst hardly in the stratosphere, they were a 12 year high at the time.
Philip Lowe will have no such fortune. Interest rates have been on the decline for the last 4 years, to give us the 1.50% pa we have currently. In the minutes from today’s meeting, the RBA cited slow global growth (particularly in China), as well as “a very large decline in business investment” domestically. These factors don’t exactly point to an economy that is expanding – at least in the short term. Given these trends, analysts are tipping another rate cut by November, but Lowe might be wary of using up one of his bullets so early, particularly when he’s been handed a gun with so few in the chamber.
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Photography by Scott Lewis