Primary factors underlying the board decision included a substantial depreciation in the Australian dollar, desired to drive investment back to domestic businesses, and higher than expected annual inflation, a rise of 0.80% noted in December last year.
Furthermore inflation was up another 0.10% in January  – which demonstrated continued upwards pressure on prices in the economy.
Inflation isn’t a negative thing – price rises come hand-in-hand with economic growth as certain goods and services increase in demand. Inflation only becomes a concern when it rises or falls too rapidly. Based on current forecasts this is not seen to be an issue for Australia, unlike many nations around the world. Other factors which the Reserve Bank considered included unemployment figures and property prices – with unemployment expected to rise in the coming months.
All this could give the Reserve Bank grounds for a rate cut or, if conditions improve, it could seek to perhaps fight inflation by using more restrictive policy. Thus, the announcements in the coming 90 days will be particularly interesting.
Did you know that even a half a percent (0.50%) discount on a $450,000 mortgage could save you up to $40,000 over the typical life span of a home loan over 25 years? Surely that is worth investigating.
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