What are the reasons behind yesterday's rate decision?

Once again the RBA kept on hold at its meeting on Tuesday. The RBA Board indicated that they were comfortable with the progress past rate cuts are making across the broader economy. The transition of the economy from resources reliant to more balanced growth is becoming increasingly evident.

What is the RBA's reading on the Australian economy?

The RBA suggests that current growth is slightly below trend and there has been a slight increase in unemployment over the past few months, both of these elements are expected to persist into the near term future.

They are encouraged that the transition is underway and heading in the right direction.

Is the RBA concerned about a housing bubble now or in the future?

The RBA in various speeches have not been concerned about a housing bubble,  rather they have highlighted the localised nature of the emerging price pressures in particular markets.

As such they do not appear to be concerned about a housing bubble.

What are the main concerns for the RBA right now? What is the RBA's reading on the Aussie dollar?

The currency is the main area of concern for the RBA.

“The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower of the exchange rate is likely to be needed to achieve balanced growth in the economy.”

The RBA would be surprised that the currency has not been more responsive to the lower interest rate levels. The RBA may have to contend with a higher currency for the period ahead, until at least the US Fed starts to withdraw their market liquidity support, perhaps in the march quarter 2014. It is unlikely, at this stage, that the RBA would pursue lower domestic rates to achieve a lower exchange rate, as it could flow directly through to the housing market.

And on the global economy?

The global economy has been broadly steady over the past several months, as the recovery/improving phases for economies gains increasing traction. The outlook for the global economy into 2014 is positive with any surprises more likely on the top side.

Generally the international is expected to be conducive to further growth in the domestic economy.

What is ING Direct's outlook for interest rates and the Australian economy?

We see the RBA remaining on hold for an extended period as the flow on effects of past rates continue to support the broader improvement in the economy.

We anticipate that in the run up to Christmas, consumers will be more willing to spend, given the improvement in disposable income flowing from lower interest rates.