Steady rates 'do not rule out further cuts'

The Reserve Bank of Australia's decision to hold the cash rate steady after two consecutive reductions at the end of last year has been met with surprise by many economists, particularly after predictions that a cut of at least 25 basis points would be made during today's (February 7) meeting.

However, according to Tim McKibbin, chief executive officer of the Real Estate Institute of New South Wales, steady rates for February do not necessarily rule out the possibility of further cuts later this year - which would support property investment right across the country.

Expressing his surprise, he said: "I believe a rate cut would have helped to stimulate housing and the economy generally, and I think it is still likely the central bank will cut rates this year."

McKibbin is not the only one who raised an eyebrow at the RBA's decision to keep rates at December 2011 levels.

The Housing Industry Association's chief economist Harley Dale expressed his disappointment with the decision, stating that a cut to interest rates "would have been appropriate".

However, if banks took independent action to "provide some further interest rate relief to Australian business", this may go a long way to restoring consumer confidence, he said.

Posted by Grace Neale