RBA cash rate decision



The Reserve Bank of Australia has made its cash rate decision following a month of intense speculation.

In line with most commentators’ and experts’ predictions, the RBA has announced it will keep the cash rate on hold at 2.00 per cent. 

This ‘wait and see’ approach was widely predicted – despite moves by regulators to reign in housing market activity – with many believing the central bank wanted more time before making further cuts. 

CoreLogic RP Data head of research Tim Lawless said with the RBA focussing on stimulating economic growth, dragging the Australian dollar lower and lifting consumer spending, they are likely to focus less on the growth in the housing market. 

“The RBA is likely to look through the pause in the rise of dwelling values reported by CoreLogic RP Data for the month of May, paying more attention to the strong upwards trend that has been evident in Sydney and Melbourne since mid 2012,” he said. 

“Dwelling values have risen by 39 per cent in Sydney and by 22 per cent in Melbourne over the past three years, while the other capital cities have seen much more sedate conditions.  

“At a time when interest rates remain low, there is the expectation that tougher lending requirements to investors as well as higher supply levels will start to cool housing market conditions and bring the rates of capital gain back to more sustainable levels across the two largest cities where growth in dwelling values has been the highest.” 

CEO of LJ Hooker Grant Harrod said the RBA’s decision to wait for May’s rate cut to influence the economy was sensible, despite weak business investment figures. 

“We haven’t seen any signs but it is too early to call if it’s had any positive effect in cities such as Perth and Canberra – it could take another three to six months,” he said. 

Mr Harrod said a rate cut was now more likely at the end of the year. 

Today’s announcement, he said, will enable the Sydney market to keep performing without venturing into ‘bubble’ territory. 

 

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