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C&G’s Guide to the RBA Announcement
For the 16th consecutive meeting, the Reserve Bank of Australia has kept the cash rate on hold at 1.5%. In today’s blog, Chisholm & Gamon provide our monthly commentary on what the cash rate announcement means for the real estate market and wider economy.
On Tuesday 6th February, the Reserve Bank of Australia met for its first board meeting of 2018. The meeting concluded with the widely-anticipated decision to keep the official cash rate on hold for another month, bringing the total consecutive months to 16 – the longest stasis for 22 years.
While some media pundits have been expecting a rate hike for several months, last week’s weaker than expected inflation data coupled with poor retail and trade data strongly supported a further hold. The Board has been waiting for inflation to strengthen for some time, and until it does, a hold is most likely on the cards.
Governor Philip Lowe remained positive throughout his post-meeting statement, detailing his confidence in the future of the economy, and noting the role of infrastructure development providing a welcome boost. The forecast for Australian GDP growth remains at around 3% over the next couple of years, too.
The issues facing the Board are wage growth – despite unemployment levels remaining low – and high debt levels. Retail competition continues to stunt the growth of household spending, in addition to a lack of disposable income. Inflation, wages and overall spending results will need to change before the board can comfortably restore the cash rate to normal levels.
When it comes to the property market, the Board continue their watch-and-wait approach. Dr Lowe described the housing market to be ‘little changed’ over the summer. While house prices have cooled in some eastern capital city pockets, the property market continues to deliver results that evince a robust marketplace.
If you have a home loan, whether investment or otherwise, paying down additional principal while rates are low may offer opportunities to shave years off your lending term. If you’re looking to buy or sell, the market remains very accommodating. With the right support and knowledge, both would-be buyers and vendors will thrive in 2018. Want to discuss how the cash rate decision might impact upon you as a buyer, vendor or landlord? C&G can assist you to develop a strategy to best leverage current conditions.