RBA leaves cash rate unchanged at 2.75% in July

The Reserve Bank has left the cash rate unchanged at 2.75% following its monetary policy meeting today.

It is the second month in a row that the RBA has left the cash rate unchanged, a move widely tipped by economists polled by Bloomberg last week.

The latest Bloomberg survey had 25 of 28 economists seeing no change at the July RBA meeting on Tuesday.

But 15 of the economists expect the August RBA meeting will cut the cash rate from 2.75% to 2.5%.

"The Reserve Bank is likely to be reasonably comfortable with the performance of the housing market; dwelling values are up 3% over the first half of the year and over the June quarter dwelling values rose by just 0.2% according to the RP Data – Rismark Indices," says RP Data national research director Tim Lawless.

"Another indicator that low mortgage rates are having their desired effect is that transaction numbers are rising; national home sales were almost 13% higher over the three months ending April 2013 compared with the same period a year ago. 

"This scenario of rising demand but contained value growth is likely to be exactly what the RBA are seeking from the national housing market.  There has also been an improvement in the number of dwelling approvals with the April data showing a 9% lift over the month and 27% lift over the year," Lawless says.

Ahead of today’s decision, HSBC Australia and New Zealand chief economist Paul Bloxham said the fall in the Australian dollar was doing “much of the RBA’s work”.

“From the RBA’s perspective the Australian dollar’s fall will be the key development affecting its policy view.

“General rules of thumb suggest that a 10% depreciation could add around 0.3 to 0.4 percentage points to the CPI each year, which all else equal, would lift the RBA’s inflation forecasts to around the middle of the target band by end-2013.

“The depreciation should also support Australia’s growth rebalancing act.”