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C&G’s Guide to the November RBA Announcement
On the afternoon of Melbourne Cup Day, the Reserve Bank of Australia announced they would maintain the all-time low national cash rate of 1.5% for yet another month. In today’s blog, C&G provide an overview of the board’s decision, and discuss the implications of stasis for the local and wider markets.
The official cash rate has remained on hold at 1.5% since August 2016, and will continue to do so for at least another month. In an uneventful Cup Day announcement, Governor Dr Philip Lowe held the national cash rate at 1.5% - a decision widely anticipated by economists – despite ongoing speculation about a change to rates at some point in the future.
A slowing in retail spending and overall low inflation are the factors most likely responsible for the Board’s unwillingness to amend the status quo. Their cautious watch-and-wait approach continues, as capital city property markets continue to enjoy robust results. Higher costs associated with both electricity and tobacco are amongst several factors gradually helping to boost inflation. Household incomes are continuing to rise albeit slowly, and the rate decision has strengthened the Australian Dollar marginally, up 76.95US from 76.81.
In relation to the property market, exponential house price growth has begun to slow swiftly in Sydney, while Melbourne’s overall easing is gentler. Generally, purchaser demand remains strong (particularly in premium locations such as Melbourne’s Bayside) - but some of the heat in the property market is beginning to cool in areas further from the city, or oversupplied enclaves.
So where will the cash rate will go from here? There are split predictions from finance pundits, with many tipping a cut no earlier than Q1 of 2018 to counteract the post-Christmas slow in spending. Other commentators are expecting a rate increase in line with steadily improving domestic and international economies. At this point it’s hard to say what the next cash rate move will be - but high levels of national household debt support the RBA holding rates as they are for now. Any increases may have an adverse effect on the economy should mortgage outgoings follow suit.
November’s RBA announcement is favorable for both buyers and vendors. A selling or purchasing strategy tailored to your own circumstances will assist in helping you to better negotiate market circumstances in the community you intend to transact. Chisholm & Gamon welcome you to our Bayside offices to discuss your real estate needs, helping you to put a property strategy in place.