Cash rate unmoved for another month

Cash rate unmoved for another month

Posted on Tuesday, August 04 2015 at 2:41 PM

In a move that had been widely predicted, the Reserve Bank of Australia announced today that the cash rate will remain at 2.0 per cent. It came down to that level on May 6, 2015, and has remained there ever since.

Governor Glenn Stevens said in his statement:
“Low interest rates are acting to support borrowing and spending. Credit is
recording moderate growth overall, with growth in lending to the housing market
broadly steady over recent months.

“Dwelling prices
continue to rise strongly in Sydney, though trends have been more varied in a
number of other cities. The Bank is working with other regulators to assess and
contain risks that may arise from the housing market.

“The Board today judged that leaving the cash
rate unchanged was appropriate at this meeting. Further information on economic
and financial conditions to be received over the period ahead will inform the
Board’s ongoing assessment of the outlook and hence whether the current stance
of policy will most effectively foster sustainable growth and inflation
consistent with the target.”

CoreLogic RP Data head of
research Tim Lawless says: “With dwelling values continuing their stellar run
of growth through July, the housing market was likely to be a key topic of
conversation for the Reserve Bank when they deliberated the cash rate today.

“Australian regulators,
including the RBA and APRA, were probably hoping to see value growth in the
housing market decelerating during the winter months, however the opposite has
been true in Sydney and Melbourne. 

“Last month, Sydney’s
annual rate of capital gain reached its highest level since 2002, with dwelling
values tracking 18.4 per cent higher over the year, while Melbourne values were
11.4 per cent higher.  

“While growth conditions
remain exceptionally strong in Sydney and Melbourne, the other capital city
housing markets are seeing much more benign rates of capital gain, highlighting
the fact that low interest rates aren’t having as strong a stimulatory effect
on housing market conditions outside Sydney and Melbourne.

“The third highest rate of
annual capital gain across the capital cities was Brisbane, where dwelling
values have increased by only 3.9 per cent over the past 12 months, and values
are falling in Darwin and Perth.

“We are expecting investor
demand will start to moderate as investment loans are both more difficult and
costly to obtain. Additionally, the cumulative effect of low rental yields,
worsening affordability, record levels of new dwelling construction and the
maturity of the growth cycle are likely to act as a disincentive to any further
acceleration in investment demand across Sydney and Melbourne, despite the
steady interest rate environment.”

Real Estate Institute of
New South Wales president Malcolm Gunning said low interest rates were
continuing to help boost the property market.  

“There has been great
activity across Sydney and NSW since interest rates were cut earlier this year.
Property buyers are using these record lows to their advantage and as long as
they factor in future interest rate rises, now is a great time to upgrade,
enter the market or invest.”

The official cash rate has
fallen 275 basis points since November 2011, with the RBA cutting interest
rates twice in 2013 in May and August and at its February and May meetings this



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