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Simon Parker
The Reserve Bank of Australia (RBA) went from praised to pariah in an instant yesterday, with the central bank failing to pass on what many pundits expected would be another cut to the official cash rate.
“The latest Consumer Price Index (CPI) figures are well within the Reserve Bank of Australia's (RBA) target zone of two to three per cent and should have provided a clear indicator to cut rates,” said REIA president, Ms Pamela Bennett, in what was a common response to the decision from amongst the real estate and mortgage industries.
“The RBA's governor has even indicated that he expects inflation to fall further in the next quarter or two."
"We know that first home buyers are starting to return to the property market but another reduction would have assisted in stimulating the lower end of the market and provided a ripple effect to those buyers trading up," Ms Bennett added.
The RBA decided yesterday against moving the cash rate from 4.25 per cent. Its decision followed two separate 25 basis point rate cuts late last year.
Before yesterday’s decision, 67 per cent of respondents to the most recent Real Estate Business Quarterly Sentiment Poll (undertaken in December) said the RBA was doing a good job of controlling inflation.
The Real Estate Institute of Queesnland (REIQ) said the decision to leave the cash rate on hold was “a missed opportunity to provide some much-needed relief to small businesses and homeowners”.
The REIQ said its member agencies have reported small increases in activity since about November, reflecting the RBA’s previous rate cuts.
“You cannot overestimate how important confidence is to the overall health of our economy,” REIQ CEO Anton Kardash said.
“At present we have a fairly lop-sided economy with only a few sectors – namely resources and banking – that are performing well.
“It is disappointing that the opportunity was not taken by the Reserve to reduce rates [yesterday] to boost confidence levels across the board, especially in those sectors of the economy that are struggling.”
The REIQ – which represents more than 1,500 real estate agencies – said it was another example of small businesses being forgotten.
“Small businesses are often overshadowed by the flashier, more lucrative, sectors but they actually provide half this country’s private sector jobs and deserve rate relief as much as anyone else.
"Indeed, ABS figures show the Queensland real estate services sector employs thousands of people yet this fact very rarely secures positive media coverage.”
Mortgage Choice spokesperson Belinda Williamson said the RBA’s decision may come with a silver lining. While she acknowledged the move would upset many borrowers, “it speaks positively of our overall domestic economic position."
"The Bank is keeping a close watch on economic indicators and if we see any significant setbacks in the coming months, it is possible the rate cut debate may return,” she said.
“For now, the situation is certainly looking more optimistic than it has been in recent months.”
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