C&G’s Guide to the Reserve Bank of Australia Cash Rate May Announcement

 

Cats have 9 lives, and so does the Reserve Bank of Australia cash rate, after it was left on hold at 1.5%, making this the ninth consecutive month that the rate has been at its all-time-lowest. Today, C&G breaks down what this means for the property market and wider economy. 

Dr Philip Lowe announced on Tuesday afternoon at 2.30pm AEST, that the cash rate would be left on hold once again, at its all-time-low rate of 1.5%. Widely predicted by experts, the rate hold is consistent with the previous ‘watch-and-wait’ approach adopted by the Board in response to a hot housing market paired with low inflation.

This month the Board did celebrate target zone inflation of 2-3% for the first time since 2014, though a weaker labour market and slow wage growth is predicted to continue for some time. Looking to the global economy, rising commodity prices are pushing up consumer spending, evidently supporting Australia’s national income, with a forecasted growth of 3% in the coming years.

In relation to real estate, the Board attributed their cash rate stasis to its concerns over the hot property market in eastern capital cities and concerns over housing affordability. Dr Philip Lowe noted that precautionary measures being taken by banks to tighten lending practices - coupled with all-time-high household debt - should to take some pressure off the rapidly growing markets in Melbourne and Sydney. The imminent influx of apartment availability will also play a role in the future face of the housing economy.

Next week’s federal budget also assumed priority on the list of determining factors during today’s Board meeting, given the likelihood of property-related legislation changes.

Despite fluctuating property prices and concerns over supply and demand, we’re confident that the Bayside region is still ripe with opportunity for both buyer, investor and vendor. Make an appointment with Chisholm & Gamon’s friendly team to discuss the right strategy for you in the current climate.