RBA cuts rates

RBA cuts rates

05 June 2012 by Staff Reporter 0 comments

Jessica Darnbrough

The Reserve Bank of Australia has cut the official cash rate for the second consecutive month.

The decision came as no surprise to many economists after last night’s share market fiasco.

Australian shares hit a six month low at close of business yesterday, wiping approximately $23 billion from the share market.

The share market drop, teamed with the recent drop in national house prices, forced the Reserve Bank to cut the cash rate 25 basis points to 3.50 per cent, according to RP Data’s national research director Tim Lawless.

“Our latest index data showed capital city home values fell by 1.4 per cent over the month of May which is a factor the Reserve Bank would have been conscious of when deliberating their interest rate setting,” he said.

“Such a significant fall over a single month was unexpected considering the cash rate was slashed by 50 basis points in the same month.  Not only did home values fall further in May, but we also saw consumer sentiment remain fairly steady suggesting the May rate cut has had little effect in stimulating consumer confidence and spending.  The rate cut today will provide a further boost to housing affordability, which the RBA has recently suggested is back around levels not seen since 2002.

“The big question now is how much of the rate cut will be passed on by the banks privately and whether this will be enough to provide a shot in the arm for the housing market.”

Angus Raine, CEO of Raine & Horne, said he expected a larger drop today.

“I was anticipating a 0.5 per cent cut, however until we know more about the fallout from the European debt crisis, a 25 basis point cut now, with another 25 points in July, is probably the most sensible course of action,” he said.

“The move by the RBA to cut the official cash rate to 3.5 per cent will provide much needed respite for owner-occupiers as lower interest rates will also help offset the impact of rising energy costs as we face the prospects of a very cold winter,” added Mr Raine.

“Likewise, with share markets around the world down by between 10 per cent and 20 per cent from their 2012 peaks, lower interest rates will help encourage more investors to take the plunge into a real estate asset, especially with vacancy rates across Australia near all-time lows.”

Jessica Darnbrough

The Reserve Bank of Australia has cut the official cash rate for the second consecutive month.

The decision came as no surprise to many economists after last night’s share market fiasco.

Australian shares hit a six month low at close of business yesterday, wiping approximately $23 billion from the share market.

The share market drop, teamed with the recent drop in national house prices, forced the Reserve Bank to cut the cash rate 25 basis points to 3.50 per cent, according to RP Data’s national research director Tim Lawless.

“Our latest index data showed capital city home values fell by 1.4 per cent over the month of May which is a factor the Reserve Bank would have been conscious of when deliberating their interest rate setting,” he said.

“Such a significant fall over a single month was unexpected considering the cash rate was slashed by 50 basis points in the same month.  Not only did home values fall further in May, but we also saw consumer sentiment remain fairly steady suggesting the May rate cut has had little effect in stimulating consumer confidence and spending.  The rate cut today will provide a further boost to housing affordability, which the RBA has recently suggested is back around levels not seen since 2002.

“The big question now is how much of the rate cut will be passed on by the banks privately and whether this will be enough to provide a shot in the arm for the housing market.”

Angus Raine, CEO of Raine & Horne, said he expected a larger drop today.

“I was anticipating a 0.5 per cent cut, however until we know more about the fallout from the European debt crisis, a 25 basis point cut now, with another 25 points in July, is probably the most sensible course of action,” he said.

“The move by the RBA to cut the official cash rate to 3.5 per cent will provide much needed respite for owner-occupiers as lower interest rates will also help offset the impact of rising energy costs as we face the prospects of a very cold winter,” added Mr Raine.

“Likewise, with share markets around the world down by between 10 per cent and 20 per cent from their 2012 peaks, lower interest rates will help encourage more investors to take the plunge into a real estate asset, especially with vacancy rates across Australia near all-time lows.”

promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2016

With a combined sales volume of $13 billion in 2016, the Top 100 Agents ranking represents the very best sales agents in Australia. Find out what sets them apart and learn their secrets to success.

featured podcast

featured podcast
William Phillips on how agents can expand their database and grow their business

Get up close and personal with the best real estate sales agents in Australia in Secrets of the Top 100 Agents. ...

View all podcasts

Are dodgy agents being punished enough?

Yes (8.6%)
No (55%)
Only in some states (2.3%)
Not all dodgy agents are being found out (34.1%)

Total votes: 220
The voting for this poll has ended on: April 15, 2017
upcoming events
REB Awards
Sydney The Event Centre 12 Sep
REB Awards
Sydney The Event Centre 12 Sep
Melbourne The Event Centre 14 Oct
Brisbane The Event Centre 18 Dec
View all events
Do you have an industry update?