01 September 2014

Hold on Cash Rate Strength for Townsville Market

"Townsville Real Estate Blog reported in its article "Boom or Bust? Convergence of Factors Impacting Townsville Real Estate Market, August 2014 that low interest rates are strength to the local real estate market. It is one of the top ten reasons for creating positive demand in the real estate market", Rapid Realty Principal, Mr McLeod said.

Today, The Reserve Bank backed up the prediction of most economists by leaving the official cash rate at a record-low 2.5 per cent for the 13th consecutive month.

Reserve Bank Governor, Glenn Stevens said; "In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates."

ANZ chief economist Warren Hogan said the economy had been playing out as expected, with housing doing well and the gradual transition to a non-mining recovery on track.

He also said the Reserve Bank would have derived no benefit from lowering rates because it would have squandered an option “that would be better used if a major problem emerges”.

Commonwealth Bank chief economist Michael Blythe said the Reserve Bank would start a “modest tightening cycle” in February that would eventually lift rates to a ‘neutral’ 3.5 per cent.

Peter Munckton from Bank of Queensland said the Reserve Bank was likely to keep rates on hold for the rest of 2014/2015, but that it would most likely cut further if it did make a change. “The bar for another rate cut is quite high and would require the currency to remain around current levels, the unemployment rate to rise further and momentum in the non-mining economy to stay modest,” he added.

"The Reserve Back decision today to keep rates on hold at .25 percent is critical for the Townsville economy to continue the path of recovery in demand and price growth moving forward.", Mr McLeod commented.

Reference:

Townsville Real Estate blog - http://townsvillerealestate.blogspot.com.au/

Reserve Bank of Australia - http://www.rba.gov.au/media-releases/2014/mr-14-15.html


Rapid Realty - www.rapidrealty.com.au