Reserve Bank maintains official cash rate

Reserve Bank’s decision to leave official cash rate at 3 percent welcomed by Housing Industry Association

The Reserve Bank’s decision to leave the official cash rate at 3 percent has been welcomed by the Housing Industry Association (HIA).

HIA Managing Director Ron Silberberg says it is important to keep interest rates stable over 2009/10 to support activity and confidence.

"The reductions in variable home mortgage rates have played a pivotal part in stimulating new housing supply but the industry outlook is by no means assured," he says.

"Ordinary home buyers could be excused for becoming confused by the constant speculation about busts, bubbles and booms."

According to the HIA, talks of near-term increases in official rates could damage the early signs of recovery in new house building.

"Reports from builders reveal that the availability of skilled trades labour has increased and prices for trades have moderated," Silberberg says.

"The recovery needs to be more broadly based and the prospects of this occurring are being severely hampered by a lack of available development credit and too little competition in the home mortgage market."

Making the announcement following a meeting today, RBA Governor Glenn Stevens says the global economy is stabilising after an earlier sharp contraction in demand.

"Downside risks to the global outlook have diminished, though they have not disappeared and most observers expect only modest growth overall," he says.

"There is tentative evidence that the US economy is approaching a turning point, but conditions in Europe are still weakening. Growth in China, in contrast, has been very strong in recent months, which is having an impact on other economies in the region and on commodity markets."

Stevens admits that while sentiment in global financial markets continues to improve, credit conditions remain difficult.

"The board’s judgment is that the present accommodative setting of monetary policy is appropriate given the economy’s circumstances," he says.

"The board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for sustainable growth in economic activity and achieving the inflation target."

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