The changing conditions in the housing market across the
country featured in the RBA policy announcement today as a measure to assess
and contain economic risks, typically driven by an easing in capital city
prices.
RBA Governor Mr Stevens said; “Credit growth picked up to
moderate rates in 2014, with stronger growth in lending to investors in housing
assets. Dwelling prices have continued to rise strongly in Sydney, though
trends have been more varied in a number of other cities over recent months.
The Bank is working with other regulators to assess and contain economic risks
that may arise from the housing market.”
The overwhelming majority of economic commentators expected
the RBA to leave interest rates on hold. Based on the finder.com.au survey of
30 economists and commentators, they found that 28 expected the cash rate to
remain unchanged.
Mr McMullen from RAMS said that with consumer confidence and
inflation low, the RBA would cut rates to help boost the economy and depreciate
the Australian dollar.
Consumer confidence has been weaker, cheaper prices in the
global oil market and the weakening of the Australian dollar were major factors
in the decision.
“Market sentiment has fundamentally shifted over the past
two months as oil prices have plummeted and concerns about deflation in Europe
grow. This has led to markets expecting 0.50 percent in the rate cuts in the
first half of 2015, “Mr Caelli from ME Bank said.
Today’s rate cut would normally provide a boost to the local
market and lead to improvements in building starts if it were not for low
business confidence and high unemployment numbers in the local North Queensland
market, Mr McLeod said from MCINC Investments and Consultancy.
Providing cheaper mortgages for first home buyers and
existing mortgage holders on variable rates is a relief for the local market, Mr McLeod commented.
However, in a low confidence market positive downward
movements in cash rates need support by businesses leveraging a lower Australia
dollar to attract export dollars, and more favourable private and government
investment in critical infrastructure and facilities developments to kick start
the economy with more jobs and cash flows, Mr McLeod said.
Reference:
Reserve Bank of Australia – www.rba.gov.au/
McINC Investments and Consultancy
Raid Realty Australia – www.rapidrealty.com.au
Townsville Real Estate Blog – http://townsvillerealestate.blogspot.com.au/