Economists say RBA will let cash rate stand

SYDNEY: The Reserve Bank of Australia (RBA) is expected to leave interest rates on hold next week in a further sign it has reached the end of its rate-cutting cycle, economists say.

All of 19 economists surveyed said the cash rate would stay at a 49-year low of 3 per cent after the central bank's board meeting next Tuesday.

Some 11 economists believe the cash rate will stay at that level until the end of the 2010 March quarter, as the economy is tested by a rising jobless rate and potential housing bubble.

But four believe recent comments by RBA Governor Glenn Stevens mean rates could rise for the first time since March 2008 before the year's end.

"The RBA appears to have no intention of reducing the cash rate any further," said Moody's Economy.com economist Matt Robinson.

"I think a housing market bubble is starting to form, and given the sentiment that Governor Stevens expressed in his speech to the Australian Business Economists, that is something that the RBA is watching and that would be a reason for them to maybe hike interest rates earlier."

In a speech this week, Stevens said it would be a "very real challenge" in the near term to make sure the ready availability and low cost of housing finance translated into an increased supply of dwellings.

He also raised doubts about whether the RBA would be deterred from raising rates if unemployment continued to rise.

"I've never heard ... some rule of thumb that says we wait till unemployment's peaked before we lift the cash rate."

- AAP