C&G Overview: The RBA June Announcement
In an announcement given on Tuesday, 3rd June 2014, Reserve Bank of Australia Governor Glenn Stevens reported that the cash rate would remain at the historic low of 2.5% this month. Today, C&G looks at how this continued period of stasis affects our current economic landscape.
Whilst there was some speculation in early May that the official interest rate may begin to rise in coming months, the announcement of the Abbott government’s severe federal budget has since put overwhelming doubt to this theory. Finder states that “The decision was largely expected by commentators and economists, with the ASX Rate Indicator putting the chance of a rate cut at only 2% yesterday.” Real Estate View also found that “even Australian sports betting agency, Sportsbet.com.au was only offering punters a minimum 1.001% return on a “no change” result” this week.
In discussion with Real Estate Business, Mortgage Choice representative Jessica Darnbrough suggests “Instead, the Reserve Bank is likely to leave rates on hold for some time and wait and see what happens to consumer sentiment over the coming months.” This is of course in line with Stevens’ continued reiterations from the RBA that “On present indications, the most prudent course is likely to be a period of stability in interest rates.”
RP Data Director Tim Lawless gives mention to the effect on the property market. “From a housing market perspective, the Reserve Bank should be less concerned about housing markets overheating, with RP Data yesterday reporting the first fall in dwelling values in a year over the month of May and the trend rate of growth across the housing market has been cooling.” He suggests such data will give added fuel to the RBA’s confidence in the cash rate stasis; a bid to continue to stimulate the economy through “housing construction and consumer spending.”
This is an excellent time for genuine buyers to take advantage of both a cooling market and historically low interest rates. Contact C&G to talk about taking the first steps.