December cash rate decision

The final interest rate decision of 2015 has just been announced.

The RBA board this afternoon resolved to leave the official cash rate at a record-low setting of 2 per cent, where it has been since May.

That decision is in line with the predictions of the four property experts Which Investment Property spoke to prior to the decision.

Property author and academic Peter Koulizos predicted that signs of a cooling housing market would be enough to persuade the board to postpone any rate change until the new year.

“There will be no early Christmas present for people with mortgages. The cash rate should stay the same as unemployment has decreased slightly and the property market is cooling, which is exactly what the RBA was hoping for,” he said.

Cate Bakos, director of Cate Bakos Property, said that comments from RBA governor Glenn Stevens in November and current economic indicators pointed to rates remaining on hold today.

“I don’t feel that we are in for a rate cut this December. Our economic indicators are a little bit mixed but, more to the point, Mr Stevens has already hinted that we aren’t likely to have a cut. Our September data won’t be released until after Tuesday’s announcement, and economists aren’t anticipating too many shocks,” she predicted.

With the RBA resolving to keep rates on hold, the focus now shifts to the first rate announcement of 2016, in February.

Alan Fox, managing director of Propertunity, said: “The RBA will want a big retail spend for Christmas – so won’t raise rates, but there may be a need to cut rates in 2016 – but that is for next year.” 

Liz Sterzel, managing director of Property Wizards, believes that the RBA will be increasingly cautious about using rate changes to shape economic direction into the coming year.

“If the RBA needs to stimulate growth through interest rate cuts they are willing and able, but they will only do this if it is likely to have a positive effect,” she said.

“Mr Stevens has noted that interest rate cuts have less of a stimulating effect than they once did, due to rates already being at record lows, and a rate cut may not be the most effective strategy at this time,” she added.

December cash rate decision
accountantsdaily logo

Something exciting is coming soon