No rate rise likely this month

Despite the Reserve Bank board looking to move rates higher over time, there is little chance it will move to raise rates at its September board meeting next week. Home loan borrowers should get a further reprieve from rising variable rates, at least for a month or two. The latest indicators on the domestic economy suggest there is no rush to push rates back to neutral levels, underlined by a 2.5 per cent fall in building approvals for July. This is a sign the RBA has been waiting for – that the housing market is starting to cool. The latest capital expenditure figures suggest that business investment is set to pick up this financial year to double-digit levels and take over from housing sector as the driver of growth. This adds to the chances of rate rises by early next year, perhaps earlier depending on other indicators emerging of ongoing healthy growth rates in the Australian economy. But for now, the RBA will be hesitant to raise rates, especially when it considers international factors. There is an uneasy calm on world share markets after the volatility of recent months and few are prepared to say that the worst is over yet.