RBA keeps cash rate at same level
2015-07-08Just as predicted by the 33 experts and economists surveyed by finder.com.au, the Reserve Bank of Australia (RBA) announced this afternoon that the cash rate will be staying at two per cent for at least another month.
Domain senior economist Andrew Wilson was unsurprised by the announcement. He said: “House price growth, particularly in Sydney and Melbourne, will continue to be fuelled by the lowest mortgage rates since the mid-1960s. Low bank deposit rates will also continue to activate investment in residential property chasing both higher yields and capital gains.”
According to the finder.com.au survey, many of the experts surveyed cited reasons for a rate pause including the RBA continuing to maintain a ‘wait and see’ approach as the recent rate cut in May has had little impact as yet on the economy.
The improved unemployment rate, higher housing costs as well as financial pressures from overseas were said to be other factors associated with the decision.
However, almost two out of five of the experts surveyed (38 percent or 12 experts) are expecting the cash rate to fall by the end of the year, which could be as early as next month. Of the 12 who expect the cash rate will fall this year, five are expecting a drop in August or September while the remaining seven are expecting to see the cash rate fall in the last quarter of 2015.
Two experts are forecasting the cash rate will rise this year – Peter Boehm from onthehouse.com.au and Mark Crosby of the Melbourne Business School.
Griffith University’s Mark Brimble said before the decision: “The Reserve Bank is between a rock and a hard place on this now, with a weak economy and property prices starting to bubble in some areas. Ideally, it needs the currency to do the work for it, but this is remaining stubbornly strong.
“This continued uncertainty in Europe and Asia and expectations of a rate rise in the US later this calendar year, the Reserve Bank is likely to sit on its hands. Regarding house prices, the property market will continue to behave unevenly across the country. Some areas will continue to rise, while others will fall dramatically as employment (and thus demand) shifts.”
Michelle Hutchison, money expert at finder.com.au, says first homebuyers will see greater pressure to enter the market if interest rates fall further this year.
“The latest global economic uncertainty has thrown a spanner in the works for our local economy, as the Reserve Bank could now look to minimise the impact by reducing the cash rate this year.
“This could lead to further pressure on the housing market, as lower interest rates could fuel further demand for investors and refinancers, leaving first homebuyers behind.”
Source：Australian Property Investor
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