C&G’s Guide to the November RBA Announcement

While most Melbournians were celebrating all the cup action from Flemington, the Reserve Bank of Australia kept interest rates on hold. The RBA’s unchanged decision centres around issues of low inflation, employment rates and falling house prices. In the latest C&G blog, we unpack the RBA’s cash rate decision to determine what future economic prospects lie ahead.

The RBA announced the official cash rate will remain on hold at 1.5 per cent during its Tuesday meeting. At a record low, the cash rate remains the same after being on hold for a record-breaking 27 months. The decision was widely speculated by economic forecasters with little change to money markets, housing prices and unemployment rates since October. The RBA maintained its reasons to ‘further progress in reducing unemployment’ and ‘having inflation return to target expectations’. RBA governor Philip Lowe remains upbeat about the decision, noting that ‘forecasts for economic growth in 2018 and 2019 have been revised up a little’.

With the rate on hold, the RBA did not appear too concerned by falling property prices. ‘Conditions in Melbourne’s housing market continue to ease,’ Dr Lowe said, who also acknowledged changes to housing credit and sharper declines in investor lending. ‘Credit conditions are tighter than they have been,’ Lowe said, ‘although mortgage rates remain low and there is strong competition for borrowers of high credit quality.’ With property experts forecasting further price falls in major cities, what happens next is yet to be seen.

The most promising development was unemployment rates. Declines in unemployment rates have fallen to 5 per cent - its lowest since 2012 - with rates expected to further decline to 4 ¾ per cent in 2020. Locally in Victoria, unemployment rates have fallen from 6 per cent in 2017 to 4.7 per cent in September – recording the strongest decline nationwide. While the RBA is positive on employment growth, it’s expected that rates could remain on hold into the New Year with nationwide demands for new job prospects and wage increases.

As for the Bayside real estate market, Chisholm & Gamon are experiencing terrific auction action, with Summer set to be a strong season. If you’re looking to buy or sell before the new year, the Chisholm & Gamon team remains on hand to assist with your property strategy.

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