C&G’s Guide to the August RBA Announcement

On Tuesday afternoon, the Reserve Bank of Australia elected to once again to hold the cash rate at its all-time low of 1.5%. In today’s blog, C&G provide an overview of influential factors behind the board’s decision and unpack what this means for the local real estate market. 

As widely anticipated by market pundits, August’s Reserve Bank of Australia board meeting amounted to another cash rate hold at 1.5%. Having remained in stasis since August 2016, the board’s ‘watch-and-wait’ approach to the wider economy and national housing market continues.  

It appears that the Board’s expectations and Australia’s economic reality are not in sync, as inflation has fallen short of the RBA’s preferred range of 2-3% (instead coming in at 1.9% for the year ending June 30) and the Consumer Price Index (CPI) rose only 0.2% (the Board had forecast a rise in the region of 0.4%). As our economy moves towards recovery inflation is expected to rise steadily, with the CPI likely to lift higher courtesy of tobacco and electricity prices. This puts a dampener on expectations of a further rate cut in the near future – with economist’s attentions now focused on 2018. Will the New Year bring a new rate increase? Only time will tell.

In relation to the property market, a sense of calm has descended across both Melbourne and Sydney, with price growth steadying as the year has worn on. There is speculation that multiple national cash rate increases are on the horizon – but this doesn’t mean that mortgage affordability will become a widespread problem. Simply looking at your monthly repayments, speaking to your broker and making minor adjustments to your budget can be enough to prepare for potential rate increases.

For those considering a property purchase or sale in the Bayside area, our local market has remained strong, with an 100% clearance rate across all four of our offices last weekend. The Chisholm & Gamon team remain on hand to assist with your property strategy, and provide insights into the local  real estate market’s activity.