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Cash rate steady as 2014 draws to a close

By Brett Pilgrim

Now could be the ideal time to think about purchasing rental property in Burnside as the official cash rate is set to remain at its all-time low for yet another month.

The Reserve Bank of Australia (RBA) reduced the rate to 2.5 per cent in August 2013 and it's stayed at this level ever since. As a result, investors should find they have access to some of the most competitive loans on the market.

As the Housing Industry Association (HIA) points out, if the cash rate is maintained at this level until March 2015, it will be the longest period of stability in its history.

Chief economist of the HIA Harley Dale predicts it will be well into 2015 before the RBA decides to raise or cut the cash rate, which will be essential to support the health of the construction sector.

"In reflection of the uncertain and challenging economic environment we face, steady interest rates would more likely be interrupted in the short term by a further reduction rather than an interest rate hike, although there is no hint from the RBA that such action is in prospect," said Dr Dale.

Governor of the RBA Glenn Stevens revealed some of the reasons behind the group's decision to maintain the cash rate at its current level. He said conditions in the economy aren't quite right to justify making a change any time in the near future.

Inflation is currently within its target range of between two and three per cent, although there is still a decline in resources sector investment that is taking its toll on the economy.

Spending in the public sector looks set to remain subdued in the near future and the RBA anticipates growth to be slightly below trend at least for the next few quarters. This mixed picture for the economy is working in the favour of investors at the moment – especially those who need finance for their purchase.

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