‘Although we are experiencing a cooling off period in retail sales, we are confident that the reduction in the company tax rate … will benefit hundreds of thousands of small and medium-sized businesses, their employees and the broader Australian community.’ – Russell Zimmerman, Australian Retailers Association
As markets widely expected, the Reserve Bank of Australia left its key interest rate unchanged at its April monetary policy meeting on Tuesday, expressing concerns over the nation’s housing market. Indeed, in some regions house prices more than doubled since the global financial crisis, prompting fears about the property bubble. Policymakers voted to keep the Cash Rate at a record low of 1.50%, claiming that any significant change to interest rates would be a major headwind to the real estate market and would lead to fragile economic growth. The RBA Governor Philip Lowe urged mortgage lenders to limit lending, as surging property prices continued pushing up the household debt to income ratio. Last month, data showed that the Australian unemployment rate climbed to 5.9%, while retail spending dropped 0.1%. These and other leading economic indicators forced the Central bank to remove its 3% economic growth forecast. However, policymakers claimed that the recent data was ‘consistent with ongoing moderate growth’. According to market analysts, the RBA will likely remain on hold for the foreseeable future amid subdued inflation growth, soft employment growth, the housing market boom and high degree of uncertainty about the global economy.