Mo’ Money, Mo’ Policy: C&G on November’s RBA Announcement

Melbourne Cup Day may indeed have held the race that stops a nation … but not the rate! November’s RBA monetary policy announcement passed without fanfare – as expected, the cash rate was left unchanged at 2.5%. In today’s C&G blog, we brief you on the core reasons for the Board’s decision to leave rates on hold for yet another month.

When it comes to fluctuations in the cash rate, Melbourne Cup Day’s rate announcement is historically a day when things happen. Over the past ten Cup Days held, the RBA has made an adjustment to the national cash rates on six occasions. Pundits including the ‘big four’ banks correctly predicted that there would be no interest rate change in November’s announcement – something for which home owners and retailers are thanking their lucky stars as we segue into the busy (and costly) Christmas season.

This continued stasis is excellent for property values which have grown steadily throughout 2014 - in part due to the ultra-low interest rates on offer from banks and in part as a result of buyer demand outstripping supply. In the premium bayside areas Chisholm and Gamon service, competition for property is strong and now is an ideal time to buy OR sell. Our suburbs aren’t growing any larger, but our city’s population surely is, which means that your window to purchase valuable property at an accessible price will soon close. As the years roll by and our population continues to increase, rare properties and popular locales will only become rarer and more costly. If you are looking for a ‘sign’ – this is it!

There are murmurings from the RBA that other levers may be used to slow buyer’s enthusiasm for property investment – so do not be surprised if an interest rate rise is on the cards for 2015. For now however, the picture is peachy: volatility in the wider global financial market and steady unemployment rates nationally mean that the RBA is unlikely to raise the cash rate in the short term. Wages are not expected to increase substantially and inflation is on track, running at between 2 and 3 percent. The RBA seek to provide accommodation monetary policy which will foster sustainable growth in demand –and that includes the property market too, Australia’s favourite form of investment!