Suspense builds as RBA leaves cash rate unchanged

What-was-the-outcome-of-the-latest-RBA-board-meeting_157_6008714_0_14102860_300Interest rates are something of an ongoing debate in the housing market. There has been lots of speculation as to when the Reserve Bank of Australia will trim the official cash rate, but the board has pushed these questions out to another month. In an April 7 statement, it announced that it would be leaving the cash rate untouched for the third consecutive month since its landmark cut in February.

This retains the already record-low level of 2.25 per cent, something which has kept property industry commentators on their toes. The Housing Industry Association (HIA) pointed out that an early cut would have offered some welcome relief to the surging housing market, particularly in property hotspots like Sydney and Melbourne.

With capital gains already a big drawcard in the Harbour City, investors should keep their fingers close to the pulse. House prices in the Sydney capital already experienced a substantial boost from the last rate cut. SQM Research’s rolling house price index has recorded asking prices for homes in the New South Wales capital as rising 10.7 per cent over the past 12 months to April 7, and another cut likely would drive values higher still as buyers access cheaper debt.

Governor Glenn Stevens pointed out that Sydney certainly remains on that board’s agenda, but it would need to reexamine the economic climate at its next meeting before making another cut. HIA Chief Economist Harley Dale said that rather than hint at a further slash to the cash rate, the board should take initiative.

“The Reserve Bank has clearly signalled it intends to undertake a further interest rate cut, so it should just get on and do it,” he said in an April 7 release.

“Two rate cuts in quick succession would bolster the strength in new home building and assist in generating momentum elsewhere in the economy.”

With the pressure for another trim mounting, it will be interesting to see what move the Reserve Bank will make at its next meeting.

Leave a Reply

Your email address will not be published. Required fields are marked *