No surprise that the RBA kept interest rates on hold at their meeting earlier this week. With the impact on the economy from bushfires and the uncertainty surrounding the corona virus the RBA thought it was prudent to leave things as is and keep the option for a rate drop up their sleeve. Many forecasters are predicting another rate cut later this year.

The issue is that with further rate cuts, this could fuel demand in the housing market including the already overpriced Sydney and Melbourne markets. This is not the outcome that the RBA wants.

I think what the RBA and government is coming to realise is that the economy cannot be controlled by interest rates alone. The majority of Australians are employed by small business and until the business are offered some tax breaks and some more freedom to operate on a free employment market without as much government intervention then it could be a while before we see the economy turn around and start to grow.

I am actually happy that the economy is not growing at the moment and interest rates are low. It makes it an ideal time to invest with cheap money provided that you are buying the right asset.