RBA keeps rates on hold for Christmas

The Reserve Bank has kept the official cash rate on hold at its last board meeting of the year.

The move, which was tipped by economists and financial markets, came as better-than-expected retail sales figures for October boosted expectations that previous rate cuts were supporting growth in non-mining industries.

Retail sales rose a seasonally adjusted 0.5 per cent in October on the back of increased spending on food, clothing and at restaurants, Bureau of Statistics data released this morning show.

Yesterday, new building approvals data for October remained resilient, slipping slightly but not as much as analysts had expected.

The central bank has reduced interest rates by 225 basis points since November 2011. 

Over the past month, it has stressed the need for a lower Australian dollar to boost export-facing sectors of the economy. The currency was trading at 95 US cents at the RBA's November meeting.

Analysts said the RBA has been showing a preference for economic growth to be driven by a weaker dollar rather than further interest rate cuts.

The RBA has also continued to flag below-trend growth for the current financial year. Bureau of Statistics data released tomorrow is expected show that third-quarter GDP rose by 0.7 per cent, with year-on-year growth reaching 2.5 per cent.

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