Brendan Rynne, KPMG Chief Economist, said:
“The RBA was right to keep rates unchanged. With the US election outcome still unclear next week, the prospect of a shock to the global markets cannot be ruled out. Australia must maintain some headroom in its official cash rate if we were to get hit with an international downturn. By not having our cash rate at or near the 0 percent lower bound we have the capacity to drop rates in order to minimise any shock to our domestic economy.
Even though the underlying inflation rate is still below the RBA’s target rate, ‘keeping its powder dry’ is absolutely the right monetary policy decision for the moment. There is a lot of noise in recent economic statistics, including last week’s higher-than-expected consumer price inflation figures, which means there is no clarity in which way the RBA should jump. So waiting for a clearer picture of which way the local and international economic forces are moving is smart. “
Senior Communications Manager, KPMG
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