A continuing strong housing market was one of the factors why the Reserve Bank board decided to keep the cash rate on hold this month and likely for some time yet.

“Although the most recent data had indicated a decline in the housing market, dwelling approvals remained at high levels and the flow-on to commencements pointed to strong growth in dwelling investment in the first half of 2014,” the board said.

“Across Australia, housing price inflation had eased somewhat in recent months from the earlier rapid pace, with auction clearance rates edging back and housing loan approvals stabilizing. Other indicators, such as turnover, first home owners grants and loan approvals for new housing, remained consistent with strong demand for both established and new housing.”

The board has kept the cash rate on hold for the ninth consecutive month at a record low 2.5%, and indicated it would continue to do so because of its impact on the economy and the “significant degree” of monetary stimulus already in place to support economic activity.

The board observed the global economy and major currencies had changed little over April, with volatility at multi-year lows, and the funding composition of Australian banks had changed little over the recent months.

“Given this outlook for the economy and the significant degree of monetary stimulus already in place to support economic activity, the board considered that the current accommodative stance of policy was likely to be appropriate for some time yet. 

John can be contacted on 0749722081 or 0410433919.  or  email him at jwhitten@ihl.net.au or net www.ihl.net.au. John Whitten is a credit representative (CRN 399796) of BLASSA Pty Ltd (Australian Credit Licence No 391237).