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RBA to take 'wait and see approach' with rates

RBA to take 'wait and see approach' with rates

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Staff Reporter

In an announcement that is likely to shock the industry, one economist has predicted that the Reserve Bank will leave the cash rate on hold in February.

Economist and director of Deloitte Access Economics Chris Richardson told Real Estate Business' sister publication The Adviser that if the "sticky tape" holding Europe together continues to stay in place, the Reserve Bank will more than likely "err on the side of caution" and keep rates on hold.

"The markets have priced in another rate cut in February, but I don't know how probable this is," he said.

"If Europe were to 'blow up' we would definitely see the Reserve Bank react in the form of rate cuts. However, the sticky tape that is currently keeping Europe together looks to be holding up quite well.

Mr Richardson's comments are at odds with what the Real Estate Institute of Australia (REIA) expects to see. It said the official cash rate should be cut, based on the most recent inflation result.

Mr Richardson said while Europe is a "cauldron of risk", it would be prudent for the Reserve Bank to take a "wait and see" approach to rates.

"The rate cuts haven't necessarily stimulated the property market as the RBA would have hoped. So the Board may prefer, moving forward, to leave rates on hold and see what happens in Europe," he said.

Mr Richardson said potential home buyers were very cautious at the moment and, as such, not prepared to jump into the property market after a few rate cuts.

He said the housing market would broadly "head nowhere" for the next few years.

"This year will be fairly flat in terms of property price growth. Heading into 2013, I expect to see price growth in the range of five to six per cent."

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RBA to take 'wait and see approach' with rates
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