Weak inflation figures signal rate cut: REIA

Staff Reporter

The Reserve Bank of Australia (RBA) has no reason not to cut interest rates next week following weaker than expected inflation figures, the Real Estate Institute of Australia (REIA) has said.

“The latest figures are well within the RBA’s target zone of two to three per cent and should provide a clear message to the RBA to reduce official interest rates at its meeting next week,” Pamela Bennett said.

The latest Consumer Price Index (CPI) figures show the trimmed mean and weighted median increased by 0.3 per cent and 0.4 per cent respectively for the March quarter 2012, compared to 0.7 per cent and 0.6 per cent respectively in the previous quarter.

“The annual change in trimmed mean is 2.2 per cent and 2.1 per cent for the weighted median, compared to 2.6 per cent and 2.5 per cent respectively for the twelve months to December 2011,” Ms Bennett said.

The housing group increased by 0.6 per cent for the March 2012 quarter compared to 0.4 per cent in the December 2011 quarter. The annual rate decreased from 4.0 per cent for the 12 months to December 2011 to 3.4 per cent for the 12 months to March 2012.

The main contributor to the March quarter increase for the housing group was electricity which increased by 3.0 per cent. For the year to March 2012 the biggest increases in the housing group were for electricity (9.9 per cent), water and sewerage (9.3 per cent) and gas and other household fuels (6.7 per cent).

“With inflation well within the RBA’s target zone and a clear message from the government that there will be a focus on reducing expenditure in the 2012/2013 Budget, it is appropriate to have a cut in interest rates,” concluded Ms Bennett.

The REIA’s stance was supported by the Real Estate Institute of Queensland (REIQ).

REIQ CEO Anton Kardash said this week’s inflation result was a further sign that the economy is in need of an immediate pick-me-up.

“The producer price index yesterday fell 0.3 per cent when most economists had predicted a rise of 0.5 per cent and the Reserve itself is starting to question the reasoning behind recent rate hikes by lenders.

“All of these signs point to an economy that is certainly not firing on all cylinders, a fact the Reserve noted in its April meeting when it lowered its expectation for growth. The Reserve must act next week and must act decisively.”

With the recent independent rate increases by lenders, the gap between the cash rate and the average variable rate is now 3.15 percentage points – the largest margin for nearly 20 years.

Mr Kardash said the Reserve must act to rewind some of the unjustified increases by lenders, which would also support the burgeoning recovery of the Queensland property market.

“It’s unfortunate that the major lenders insist on achieving profit margins more in tune with the good times rather the current economy reality,” he said.

“In this game of cat and mouse that lenders seem to play with the Reserve and their own customers when the central bank reduces the cash rate, the Reserve must now take back some control and reduce rates by at least 50 basis points on Tuesday.”

Staff Reporter

The Reserve Bank of Australia (RBA) has no reason not to cut interest rates next week following weaker than expected inflation figures, the Real Estate Institute of Australia (REIA) has said.

“The latest figures are well within the RBA’s target zone of two to three per cent and should provide a clear message to the RBA to reduce official interest rates at its meeting next week,” Pamela Bennett said.

The latest Consumer Price Index (CPI) figures show the trimmed mean and weighted median increased by 0.3 per cent and 0.4 per cent respectively for the March quarter 2012, compared to 0.7 per cent and 0.6 per cent respectively in the previous quarter.

“The annual change in trimmed mean is 2.2 per cent and 2.1 per cent for the weighted median, compared to 2.6 per cent and 2.5 per cent respectively for the twelve months to December 2011,” Ms Bennett said.

The housing group increased by 0.6 per cent for the March 2012 quarter compared to 0.4 per cent in the December 2011 quarter. The annual rate decreased from 4.0 per cent for the 12 months to December 2011 to 3.4 per cent for the 12 months to March 2012.

The main contributor to the March quarter increase for the housing group was electricity which increased by 3.0 per cent. For the year to March 2012 the biggest increases in the housing group were for electricity (9.9 per cent), water and sewerage (9.3 per cent) and gas and other household fuels (6.7 per cent).

“With inflation well within the RBA’s target zone and a clear message from the government that there will be a focus on reducing expenditure in the 2012/2013 Budget, it is appropriate to have a cut in interest rates,” concluded Ms Bennett.

The REIA’s stance was supported by the Real Estate Institute of Queensland (REIQ).

REIQ CEO Anton Kardash said this week’s inflation result was a further sign that the economy is in need of an immediate pick-me-up.

“The producer price index yesterday fell 0.3 per cent when most economists had predicted a rise of 0.5 per cent and the Reserve itself is starting to question the reasoning behind recent rate hikes by lenders.

“All of these signs point to an economy that is certainly not firing on all cylinders, a fact the Reserve noted in its April meeting when it lowered its expectation for growth. The Reserve must act next week and must act decisively.”

With the recent independent rate increases by lenders, the gap between the cash rate and the average variable rate is now 3.15 percentage points – the largest margin for nearly 20 years.

Mr Kardash said the Reserve must act to rewind some of the unjustified increases by lenders, which would also support the burgeoning recovery of the Queensland property market.

“It’s unfortunate that the major lenders insist on achieving profit margins more in tune with the good times rather the current economy reality,” he said.

“In this game of cat and mouse that lenders seem to play with the Reserve and their own customers when the central bank reduces the cash rate, the Reserve must now take back some control and reduce rates by at least 50 basis points on Tuesday.”

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