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PHOTO: Australia keep rates on hold – whilst New Zealand rates are climbing. Sydney. FILE

The official interest rate remains at a record low of 0.10 per cent, with the arrival of the new COVID-19 variant Omicron on Australian shores dampening some of the optimism around the economy’s strong rebound.

At its final meeting of the year on Tuesday, the Reserve Bank of Australia announced it would be keeping the cash rate target at the same level for the 13th consecutive month.

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While a number of economists were forecasting a hike from the rock-bottom rate of 0.10 per cent by as early as the third quarter of 2022, now many believe that will be pushed back to 2023 or even further out to the RBA’s original plan of 2024.

“The emergence of the Omicron variant is now presenting another downside risk to the economy,” said Besa Deda, chief economist of Westpac Business Bank and secretary of the Australian Business Economists’ Association. “We don’t know enough about it yet, but it makes it now more appropriate for the RBA to stick to its timetable. 

“We don’t expect rates to rise now until early 2023 but if this variant leads to an acceleration in hospitalisations and prolonged lockdowns, then next year’s growth rate could be clipped.”

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Latest Australian Bureau of Statistics figures showed that the gross domestic product fell 1.9 per cent in the September quarter, which was much less than was feared despite the lockdowns in NSW, Victoria and the ACT, and was only 0.2 per cent below the pre-pandemic December quarter in 2019.