THE Reserve Bank of Australia’s decision to keep the official interest rate on hold at a record low of 1.5 per cent is good news for regional economies, Western Research Institute (WRI) chief executive officer Kathy Woolley says.
The RBA’s monthly rate announcement was made on Tuesday and the board left cash rate unchanged at 1.5 per cent for the 24th month in a row.
Ms Woolley said the drought-affected region was already under enough pressure without an unexpected rate increase.
“It’s good news for regional people, it would only add pressure and demand on their finances,” she said.
“They’re already feeling pressure from the drought.
“The last thing they wold need is an interest rate increase.”
RBS monetary policy decision’s Philip Lowe also acknowledged that the drought had led to difficult conditions in parts of the farm sector.
It’s good news for regional people, it would only add pressure and demand on their finances.Western Research Institute chief executive officer Kathy Woolley
“One continuing source of uncertainty is the outlook for household consumption,” he said.
“Household income has been growing slowly and debt levels are high.”
Ms Woolley said household consumption, low wages growth and uncertainty due to the drought were very concerning factors for communities across the Central Tablelands and Central West.
“The drought is having an effect on household consumption,” she said.
Currently, 100 per cent of the state has been declared in drought or drought-affected and the lack of rain has led to crippling conditions for many primary producers.
Mr Lowe said the Bank’s central forecast for the Australian economy remained unchanged.
“GDP growth is expected to average a bit above three per cent in 2018 and 2019,” he said.
“This should see some further reduction in spare capacity.
“Business conditions are positive and non-mining business investment is continuing to increase.
“Higher levels of public infrastructure investment are also supporting the economy, as is growth in resource exports.”