The Reserve Bank of Australia has kept the interest rate steady at 0.75%, but economists still expect another cut in 2020

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  • The Reserve Bank has left the cash rate on hold at 0.75% at its November meeting on Tuesday, in line with expectations from economists.
  • The current rate, last cut at the RBA’s October meeting, is a record low. It followed cuts in June and July.
  • Though RBA governor Philip Lowe flagged a possible “turning point” in the Australian economy, a further cut to 0.5% is possible in 2020.
  • Visit Business Insider Australia’s homepage for more stories.

The Reserve Bank of Australia (RBA) has decided to keep the interest rate steady at its November meeting.

The cash rate will remain unchanged at 0.75%, a record low achieved with a cut in October. That rate cut followed cuts in June and July.

Economists widely assumed the RBA would keep the rate steady at its November meeting, though the possibility of a further cut to 0.5% in 2020 has been discussed.

In a statement announcing the decision, RBA governor Philip Lowe was cautiously optimistic about the state of the Australian economy.

“After a soft patch in the second half of last year, the Australian economy appears to have reached a gentle turning point,” Lowe said.

“The central scenario is for growth to pick up gradually to around 3 per cent in 2021. The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices and a brighter outlook for the resources sector should all support growth.

“The main domestic uncertainty continues to be the outlook for consumption, with the sustained period of only modest increases in household disposable income continuing to weigh on consumer spending. Other sources of uncertainty include the effects of the drought and the evolution of the housing construction cycle.”

In November, Lowe addressed growing speculation the RBA would turn to unconventional policy such as negative interest rates and quantitative easing. He pointed to a narrow set of circumstances in which Australia would enter a program of quantitative easing, and suggested negative interest rates – which have been seen in Europe and Asia – were “extremely unlikely”.

Nonetheless, there is still wide speculation interest rates could go lower.

“There is increasing speculation in the market that the RBA could lower the cash rate as low as 0.25% and adopt a quantitative easing program but Governor Lowe stressed recently that the threshold for undertaking QE in Australia is far off,” Mortgage Choice CEO Susan Mitchell said in a note provided to Business Insider Australia.

“While we cannot be certain of what policy makers have in store for the future, what we do know is that we can expect to see a sustained period of low interest rates for the foreseeable future.”

Dr Sarah Hunter, chief economist at BIS Oxford, said in a note issued to Business Insider Australia a further cut would likely follow in early 2020 thanks to weak labour market data and the downward trend of key indicators. “With the leading indicators still trending down we expect the Board to intervene one more time and reduce the cash rate to 0.5% in early 2020,” she said.

Lowe’s statement backed the possibility monetary policy could be eased further.

“The Board is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.”

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