Michele Bullock, Reserve Bank hold interest rates at 4.35%

In a widely anticipated decision, the Reserve Bank of Australia decided at its last meeting for the year to leave its interest rate unchanged, effectively giving borrowers a two-month holiday from the threat of higher repayments.

The RBA board made its call following data showing inflation growth slowed to 4.9 per cent in October and increasing signs of the economy slowing.

Household spending has fallen significantly as millions of families have cut back heavily on discretionary purchases and there are signs that the labour market, which has proved resilient for most of the year, may be starting to weaken.

But the central bank has flagged it is prepared to tighten monetary policy further in the new year if underlying price pressures, particularly in the cost of services, do not ease more significantly.

The next Reserve Bank board meeting is scheduled for February 5 and 6, when the central bank shifts to a new calendar of eight meetings per year, as recommended by the RBA review.