The Housing Industry Association (HIA) is disappointed with Reserve Bank of Australia's decision to keep interest rates steady for at least another month. The RBA has recently announced on Tuesday that it can possibly keep cash rates for another month as a weak Australian dollar reduces the need to cut rates.

The Australian dollar has slightly increased due to the improved manufacturing industry and house prices after the dollar fell to its lowest exchange rate in almost three years.

The Aussie dollar rose to 91.71 US cents after latest figures of two sectors have shown improvement despite RBA's lower cash rate. The Australian dollar was pegged at 91.1 US cents early Tuesday morning, its lowest exchange rate after September 2010.

The TD-Securities/Melbourne Institute reports that the inflation rate has remained the same but climbed to 2.4 per cent during the last 12 months. Citi economists Josh Williamson and Paul Brennan say the Reserve Bank of Australia will not change its monetary policy due to Wednesday's figures that support their predictions.

In previous months, the RBA has cut interest rates to stimulate the Australian economy. The Housing Industry Association senior economist says RBA's move will only extend the slump of the residential construction industry where activity levels are at their lowest in more than ten years.

Lenders reduce home loan interest rates

With the mining sector in decline, Mr Garrett said there is a need to prepare the housing construction industry to step up and fill the void. He believes that RBA should cut interest rates as soon as possible since low rates would encourage consumers to buy homes.

The HIA has placed the responsibility on banks in Australia to lower interest rates despite the Reserve Bank's decision. A number of lenders reduced interest rates on home loan products as competition for new mortgages remain high among banks. Borrowers should expect more reductions on home loan interest rates in July.

Interest rate cuts not likely soon

The sharp drop of the Australian dollar since May has effectively caused analysts to reduce their expectations of interest rates cut in July. Data from Credit Suisse showed financial markets were expecting an 18 per cent chance of interest cuts.

The unexpected boost of Australian Performance Manufacturing Index is a tentative but welcome sign that manufacturers' efforts in fighting industry pressures have paid off. The housing market became stronger in June with values rising 1.9 per cent in eight cities according to data from RP-Data Rismark Index.

Although the Reserve Bank is not expected to cut interest rates anytime soon, economists still warn of further rate cuts later this year due to the slower transition of growth towards non-mining sectors.

Tom Kennedy, a JP Morgan economist, predicts RBA will cut interest rates in November and another during the first quarter of 2014. This would make the cash rate fall to 2.25 per cent.

The Reserve Bank will be closely monitoring the credit crunch in China and the waning stimulus program of the U.S. Federal Reserve. The Australian dollar is a crucial factor on interest rate outlook and the dollar is affected by what's happening in the global financial scene.

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