RBA leaves rates on hold, again: What the Experts said

Earlier this month, the Reserve Bank of Australia decided to keep the official cash rate at 1.5%, for the 13th consecutive month. At the time the decision was widely expected, however there were a range of issues which the RBA cited as being critical to their forecasting. These included low wages growth, a higher Australian dollar, lower employment growth and a softening of the real estate market.

The RBA last cut the cash rate in August 2016, following an earlier cut to 1.75 per cent in the preceding May. There has not been an official cash rate increase since November 2010, which had led some industry commentators to speculate that an official rise was on the cards.

Since the official announcement there has been a deluge of commentary on the RBA’s decision, specifically around what a rate hold implies about the state of Australia’s real estate markets. To give a broader context to this rate hold, we’ve listed what some of Australia’s leading minds had to say, and what the decision says about the real estate market.

 

What the Experts Said

RBA Governor Philip Lowe

“Conditions in the housing market continue to vary considerably around the country… Housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney. In some other markets, prices are declining.”

CoreLogic head of research Tim Lawless

“CoreLogic home value figures confirmed that the pace of capital gains has slowed in Sydney and Melbourne… These are the two housing markets that have caused the most concern for policy makers because of the previously high rates of capital gain that had been running since early 2012, coupled with record high levels of household debt and high concentrations of investment.”

“With growth conditions across the housing sector moving back to a more sustainable level of growth, the likelihood of a cash rate hike in 2017 appears highly unlikely.”

AMP Capital chief economist Dr Shane Oliver

“Basically the RBA and rates are stuck between a rock and a hard place… Strong business confidence and jobs growth, the RBA’s expectations for a growth pick up and worries about reigniting the Sydney and Melbourne property markets argue against a rate cut. But record low wages growth, low underlying inflation, the impending slowdown in housing construction, risks around the consumer and the rise in the Australian dollar argue against a rate hike. So it makes sense to leave rates on hold at 1.5 per cent and this is likely to remain the case out to late next year at least.”

Capital Economics’ Paul Dales

“We suspect the combination of subdued GDP growth, low inflation and a growing focus on financial stability will mean it keeps rates there [at 1.5 per cent] for another two years yet,”

Westpac Chief Economist Bill Evans

“We continue to expect rates to remain on hold in 2018.”

Stephen Anthony, chief economist with Industry Super Australia

“Central banks are practicing faith-based economics and the quantitative easing and rate cut policies of recent years have created zombie economies. I’d say to the bank, ‘Stop pretending you do know and issuing statements based on faith.”

 

The Take-Aways

As always, any decision by the RBA regarding rates can be taken in a multitude of ways. We’ve listed below our take-aways based on the commentary since the decision, which in our opinion is positive for the Brisbane real estate market.

  • The majority of experts believed a rate rise wouldn’t occur until 2018 at the earliest
  • Sydney and Melbourne real estate markets are the focus of the ‘industry softening’
  • Increased wage growth is crucial to any potential rise

 

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