Wed
04 Apr
2018

RBA cash rate remains on hold for April

Yesterday, RBA Governor Philip Lowe and the Reserve Board met for April—and in line with the forecasts of many analysts, decided to keep the cash rate on hold at 1.5%.

"No surprises there as both the Reserve Governor and the Board are flagging to industry and business that they're in no rush to move the rates higher anytime soon," said Ben Kingsley, chair of Property Investment Professionals of Australia (PIPA).

Kingsley said the reason why the cash rate hasn't shifted is because the Reserve Bank still wants to see stronger economic growth and "more pressure on wages".

According to Lowe, employment grew strongly over the past year, with employment levels rising across all states.

"The strong growth in employment has been accompanied by a significant rise in labour force participation, particularly by women and older Australians," he said. "The unemployment rate has declined over the past year, but has been steady at around 5½ per cent over the past six months. The various forward-looking indicators continue to point to solid growth in employment in the period ahead, with a further gradual reduction in the unemployment rate expected."

In contrast, wages growth remains lacklustre. Lowe said this was likely to continue for some time, although a stronger economy should see a lift in wages growth over time.

Leanne Pilkington, president of the Real Estate Institute of New South Wales (REINSW), said it was unlikely that interest rates would change in the foreseeable future.

"The residential housing market and the economy generally requires the steady interest rate environment to continue," she said. "Employment growth has been encouraging but tempered by flattened wage growth, while house price growth is also subdued and clearance rates are solid if unspectacular."

Lowe drew attention to the slowing housing markets in Sydney and Melbourne, adding that nationwide measures of housing prices have seen little change over the past six months.

"In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years," he said. "APRA's supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high."

Tim Lawless, head of research at CoreLogic, said housing market conditions are likely to be moving further down the Reserve Bank's list of priorities, as the housing market is showing signs of moving through a soft landing, with the pace of value decline easing over recent months.

"National dwelling values were flat last month; however, six of the eight capital cities saw dwelling values slip lower in March, albeit at a reduced rate of decline relative to other months," Lawless said.

"Despite the hold decision from the RBA, mortgage rates remain close to historic lows, particularly for owner-occupiers who are paying down both their interest and principal.

"Investors are facing a mortgage rate premium of around 60 basis points, but relative to long term averages, their mortgage rates are low. While the RBA has flagged the next move in interest rates will be a rise, it remains likely that any hike to the cash rate is well in the future.

  

Michael Mata, Your Investment Property, 4 April 2018
https://www.yourinvestmentpropertymag.com.au/news/rba-cash-rate-remains-on-hold-for-april-248351.aspx

 

 

 

 

 

 

 

 

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