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Getting in before the race that stops the nation, the Reserve Bank of Australia has announced its decision on the official interest rate this month.
Following an out-of-cycle rate reduction in March, the RBA has followed market consensus and reduced the official cash rate to 0.10 of a percentage point from the already record-low 0.25 of a percentage point.
LJ Hooker’s head of research, Mathew Tiller, believes the rate change will be a positive announcement for the property industry.
REB reported this morning that the researcher expects the RBA’s November rate cut will further encourage buyers to turn up to open homes and auctions.
Mr Tiller also expects listings to again rise as home owners that withdrew their properties from the market at the beginning of the pandemic become more comfortable about achieving a strong result.
AMP chief economist Shane Oliver also correctly predicted the RBA would cut rates prior to the announcement.
“The RBA’s own forecasts show that it will not achieve its employment and inflation objectives over the next two years, and so, further easing is required to help address this. Recent RBA commentary has provided a strong signal that further easing is imminent. We expect this to take the form of a rate cut to 0.1 [of a percentage point] and broad-based quantitative easing,” he noted.
Bankwest Curtin Economics Centre director Rebecca Cassells said the RBA’s cut signals its intent to further support the economic recovery by making borrowing as attractive as possible for households.
“Low inflation figures will tip the RBA’s decision to cut rates and we may also see additional quantitative easing over the coming months if progress towards the RBA’s 2–3 per cent inflation target is viewed as too slow,” she said.
“Now that Victoria can add its strength, the pace of economic and job recovery should pick up substantially in the coming weeks and months. Whether this pace will deliver a full recovery of jobs lost plus additional employment and wage growth remains more possible than probable at this time.”
Thomas Devitt, from the Housing Industry Association, noted Australia’s inflation rate was well below the RBA’s target as well as the high rate of unemployment.
“The risks for the economy are highly asymmetric, with the costs of doing too little likely to be far greater than the costs of doing too much,” he said.
“The RBA’s balance sheet expansion is also significantly behind that of other central banks. This is putting upward pressure on the Australian dollar, weighing on exports and potentially turning consumers towards imports rather than domestic goods and services.”
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