C&G on the RBA April Announcement
At 2.30pm on Tuesday 1st of April , The Reserve Bank of Australia (RBA) announced the outcome of its monthly board meeting. It has been revealed that the official cash rate of 2.5 per cent will be left on hold - a record historical low. April’s meeting marks the seventh in a row that the board has determined rates remain fixed at 2.5 per cent, with the last rate decrease taking place in August 2013 and no meeting occurring in January 2014.
Governor of the RBA, Glenn Stevens discussed the financial conditions in Australia as remaining accommodative. “Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time,” he said.
So what does this mean for the property market? Trends locally bode well, with team C&G anticipating a busy Easter and a strong market heading into winter. The RBA has done its job by using ultra-low interest rates to lift property values – March in particular proving a robust market - the strong growth of which should begin to steady later in 2014.
Whilst the consensus is that the cash rate will remain on hold for months to come, economists have a difference in opinion as to when the rates will rise. Heritage Bank’s Paul Williams foresees interest rates increasing in early 2015, as opposed to CBA’s Michael Blythe who believes that rates will be on hold for most of the year, with a rate rise in their forecast in November on Melbourne Cup Day.
Finder.com.au’s Michelle Hutchison stated that now is the time to plan ahead before interest rates start to rise. “If the official cash rate does increase by the end of the year, it’s likely that we will see home loan interest rates start creeping up before then. If you’re an existing borrower, it’s a good idea to review your budget and factor in higher costs now, before interest rates rise,” she said.
Despite the difference of opinions, RBA’s Glenn Stevens remains optimistic -
“Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.”
For further statements from Glenn Stevens regarding the Monetary Policy Decision, click here.