RBA holds base rate

The RBA has kept interest rates at 4.75 per cent, citing increased concern about the strength of the global economic recovery.

According to the Credit Card Blog, the Reserve Bank of Australia (RBA) has announced that interest rates will be kept at 4.75 per cent for at least another month, amid concern over the impact of uncertainty on the country's Mortgages market.

Following its meeting yesterday (July 5th), the RBA admitted to renewed concerns over the possibility of a global economic downturn and hinted strongly that the cash rate may remain at its current level until next year.

"The global economy is continuing its expansion, but the pace of growth slowed in the June quarter," governor Glenn Stevens said in a statement. "A key question is whether this more moderate pace of growth will continue."

Although Mr Stevens insisted the recovery process following this year's natural disasters in Queensland and Victoria is continuing, he acknowledged that coal production in affected mines had been relatively slow to resume.

While the RBA tipped demand for commodities to coincide with a boost to output, it predicted the pace of expansion would be slower than initially anticipated. However, it suggested on-trend global growth could provide some momentum for the Australian economy.

The provision of banking credit remained "modest", with financial institutions hesitant about home loan and general household lending. The RBA also noted a slight decline in property prices over the last few months.

Consumer price inflation was tipped to stay "elevated" over the short term, before easing closer to the target as the impact of the recent flooding dissipates. Underlying inflation, however, is expected to increase gradually.

Housing Industry Association (HIA) chief economist Dr Harley Deal welcomed the RBA announcement, claiming a base rate hike would have been "a blight on the current Australian economic landscape".

Dr Dale pointed out that demand for home loans had been muted in recent months and urged the central bank to keep interest at its current low level until the housing sector can put itself on a firmer footing.

Meanwhile, Commonwealth Bank chief executive Ralph Norris has hit out at the government's programme of financial sector reform.

Commonwealth Bank has warned the government's wide-ranging programme of financial sector reforms is imposing a significant burden on Australian lenders, with home loan and credit card legislation in the offing.

According to AAP, Commonwealth chief executive Ralph Norris told a business event in Brisbane that the pace and extent of the regulations had already had a noticeable impact and could cost the group as much as $100 million per year.

"One really has to ask whether all these changes meet any reasonable social benefit-cost analysis," he observed. "The amount of regulatory change is staggering. So is the cost."

Mr Norris added that the overall expense generated by the new laws could amount to more than $500 million annually, but insisted the banking industry would seek to work alongside the Labor-led coalition to promote reasonable reform.

Treasurer Wayne Swan told the news provider yesterday (July 4th) he was hopeful families across Australia would benefit.