RBA leaves cash rate unchanged at 1.5 percent

The Reserve Bank of Australia (RBA) has decided to leave the cash rate unchanged at 1.5 percent after its monthly meet on Tuesday.

RBA governor Philip Lowe said the Australian economy is continuing its transition following the end of the mining investment boom.

“Recent data are consistent with ongoing moderate growth. Most measures of business confidence are at, or above, average and non-mining business investment has risen over the past year. At the same time, some indicators of conditions in the labour market have softened recently. In particular, the unemployment rate has moved a little higher, and employment growth is modest. The various forward-looking indicators still point to continued growth in employment over the period ahead. Wage growth remains slow.

“The outlook continues to be supported by the low level of interest rates. Lenders have recently announced increases in mortgage rates, particularly those paid by investors. Financial institutions remain in a good position to lend. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.

The next RBA meeting will be on May 2.

Meanwhile, here are some opinions by real estate industry identities over RBA’s decision to hold the cash rate call:

REINSW president John Cunningham. Photo: Supplied.

Real Estate Industry of New South Wales President John Cunningham

“Keeping rates as they are is the right choice. Ultimately it is the best policy at the moment. There is an interesting dynamic occurring, and the decision by the major banks to lift interest rates has meant that the RBA has had some of its work done for it.  Higher interest rates will act to dampen the market, which will help stabilise the sector and the flurry of activity that can create volatility and the infamous idea of a housing bubble.”

Laing+Simmons managing director Leanne Pilkington

Laing+Simmons Managing Director Leanne Pilkington

“While today’s decision by the RBA might have been a foregone conclusion, attention now turns to the affordability package earmarked in next month’s federal budget. Measures that encourage retirees to put larger homes on the market and provide more options for growing families must be part of the solution.”

HIA Chief Economist, Dr Harley Dale

Housing Industry Association chief economist, Dr Harley Dale            

“The RBA has increased its focus on the housing sector in its latest statement, with an additional paragraph included related to household borrowing and the supervisory measures announced by APRA (Australian Prudential Regulation Authority) last Friday.

“This is hardly a surprising development. The RBA was always likely to beat its drum today on the need to reinforce strong lending standards in the Australian housing market.    

“The HIA reiterates our view that the additional mortgage lending measures announced by APRA last week represent a cautious and sensible approach to Australia’s home lending environment, but stricter measures need to be appropriately applied.

“The RBA itself recognises in today’s statement that conditions in the housing market vary considerably around the country. The application of stricter lending standards to geographical areas, types of buyers or housing product that do not represent any risk to financial stability would exacerbate the prospect of an impending downturn in new home construction being larger than would otherwise be the case.                

“That unwelcome outcome would present the RBA and Australia’s economy more broadly with an additional problem that it obviously doesn’t need.”

REIQ CEO Antonia Mercorella

Real Estate Institute of Queensland CEO Antonia Mercorella

The REIQ welcomes the RBA decision to leave cash rates on hold at the current historic low of 1.5 per cent. The housing market throughout Queensland, and most of the country would benefit from continued low rates.

“Our economy in regional Queensland is far from strong and giving people access to affordable loans is a key part in strengthening the housing market, which underpins the broader regional economy.”

LJ Hooker’s Head of Research Mathew Tiller

LJ Hooker’s Head of Research Mathew Tiller

“The RBA is holding tight in the immediate term and continuing to keep a watchful eye on the key indicators over coming months, especially with several influences at play, currently. The RBA will likely hold the line for the remainder of 2017 but, as we’ve seen this year, that doesn’t guarantee the status quo for mortgages, with many banks citing the cost of funding to raise their house interest rates.”

Tim Lawless

CoreLogic head of research Tim Lawless

“In a widely anticipated decision, the Reserve Bank has left the cash rate on hold at the record low setting of 1.5 percent. It seems the RBA is stuck between a rock and hard place.  They aren’t likely to push rates higher just to quell housing market exuberance; doing so could push inflation lower and the Australian dollar higher as well as cancel out some of the much-needed stimulus that many sectors of the economy are benefitting from. On the other hand, the RBA would be loath to push rates lower out of concern for adding further fuel to an already overheated housing market. With the cash rate likely to remain on hold, at least for the remainder of the year, it’s looking increasingly like other factors will be necessary to undertake the heavy lifting required to bring about a housing market slowdown. Mortgage rates have been rising despite the steady cash rate, which will act as a disincentive to market demand.”

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June Ramli

June Ramli was a in-house journalist for Elite Agent Magazine.