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Interest rates remain on hold at 2.5%

By Carol Birrell

The official cash rate, which is already at a record low, was cut by 25 basis points last month.

With the country about to go to the polls and the last cut still to make a visible impact, economists had widely predicted that the rates would hold steady.

HSBC chief economist Paul Bloxham said the RBA would wait to see what happens to business confidence following the federal election, with governor Glenn Stevens having expressed concerns about weaker sentiment.

“The election will hopefully deliver some more certainty about the policy framework and objectives, whichever side wins,” Mr Bloxham said.

He also expects the RBA’s next move to be reliant on the Australian dollar, with the central bank more comfortable with a currency closer to 85 US cents.

Some economists suggested the central bank would wait to see the September inflation data before making another move.

National Australia Bank senior economist David de Garis said there was room for another rate cut before the end of 2013 – even if the Aussie dollar falls further – with unemployment forecast to push through 6.0 percent.

“The RBA have made it pretty clear that even with the Aussie dollar going down, they still expect inflation to be within their target bands and so there’s not going to be a barrier to another cut,” Mr de Garis said.

Alex Parsons, CEO of RateCity, said more than 80 percent of borrowers hold home loans with the major banks and many are likely to be paying over a thousand dollars more than necessary.

“If your home loan rate has a five in front, you’re probably paying too much and it’s time to ask your lender for a discount or consider refinancing into a comparable mortgage with a more competitive rate.”

The Reserve Bank has delivered four rate cuts since late last year


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