RBA makes May rate call

The RBA has left rates on hold at their effective lower bound of 0.1 per cent.

“The board is committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently. This is unlikely to be until 2024 at the earliest,” RBA governor Philip Lowe said. 

The decision comes ahead of one of the most important budgets in Australian history, with Treasurer Josh Frydenberg set to turn away from austerity and take advantage of the RBA’s record-low rates to fuel Australia’s economic recovery.

“Treasury’s projections are that nominal economic growth will exceed the nominal interest rate for at least the next decade,” Mr Frydenberg said in a major pre-budget speech last week.

“That is, economic growth will more than cover the cost of servicing our debt interest payments. As a result, by growing our economy we can maintain a steady and declining ratio of debt to GDP over the medium term as we continue to move towards balancing the budget.”