“The RBA is likely to be keeping a keen eye on the housing market; since the May rate cut and subsequent cut in August, numerous key housing market indicators have bounced higher”.
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“With monthly indicators of inflation remaining low and the Australian dollar remaining relatively high, there remains a strong chance of another rate cut later this year”, he said.
In currency markets, the Australian dollar was trading up 0.9 percent against the USA dollar at 0.7646, after the RBA announced it would hold rates steady.
Liberty’s Lynne Jordan elaborated that there will be an increasing need for the government to use other measures such as fiscal stimulation if it is going to succeed in its objectives to return the economy to benchmark GDP growth whilst also fighting deflation.
“The likelihood that the maximum drag from the terms of trade and capex decline is behind us is key for policy deliberations and, on their own, argue against any further easing”, she said.
The Australian dollar jumped on Tuesday (Sept 6) against most major currencies as the nation’s central bank kept interest rates unchanged at a record low.
LJ Hooker CEO Grant Harrod said all eyes were on auction clearance rates as a further cut was mooted. “Listing volumes are very tight and borrowing rates are at unprecedented levels”.
The decision has not come as a surprise to the majority of economists with many predicting the RBA would not make back to back cuts after reducing the cash rate by 0.25% in August. CoreLogic research head Tim Lawless believes current conditions in the Australian property market likely backed the RBA into a corner today.
“In contrast, there has been a consistent wind down in transaction numbers which implies market demand may be getting exhausted”.
“In the months directly following the last 10 RBA rate cuts prior to August 2016, the average home loan size in Australia increased seven times and the first home owner loan size rose eight times”, finder.com.au insights manager Graham Cooke said in a recent statement.
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“Today’s RBA meeting looks unlikely to provide investors with any reason to change their macro outlook”, Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote in a note. The most likely timing will be November when September-quarter inflation data is available.
