The Reserve Bank (RBA) held their May board meeting earlier this week and at the meeting they decided to lower official interest rates by 25 basis points to 2.75%.
At the time of writing, three of the four major banks had passed on the full 25 basis point cut to mortgagees on variable home loan rates with ANZ to announce its decision on Friday.
Despite the cash rate moving to historic lows, the average standard variable mortgage rate, which is now likely to be 6.2%, is still 45 basis points higher than the 2009 lows (5.75%). The Governor’s statement following the meeting included a number of key points detailed following. ‘The global economy is likely to grow at a below trend rate in 2013 before picking up next year.
Commodity prices have moderated a little in recent months though they remain high by historical standards. Growth in Australia was close to trend in 2012 but a bit below trend over the second half of the year and this appears to have continued in 2013.
With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years.
There has been a strengthening in consumption and a modest firming in dwelling investment, and prospects are for some increase in business investment outside the resources sector over the next year. Recent data on prices confirm that inflation is consistent with the target and, if anything, a little lower than expected.
The exchange rate, on the other hand, has been little changed at a historically high level over the past 18 months, which is unusual given the decline in export prices and interest rates during that time. Moreover, the demand for credit remains, at this point, relatively subdued.’
Overall it appears that the RBA cut interest rates because the exchange rate remains high making business tough for exporters and because economic growth and inflation is at below trend levels providing the RBA with the necessary impetus to cut rates.
Some of the comments suggest that there may be additional interest rate cuts to come; that is the view of financial markets, which are pricing in another rate cut around August according to the ASX cash rate futures implied yield curve.
Retail trade data for March 2013 was released earlier this week by the Australian Bureau of Statistics (ABS). The data showed that over the month retail trade fell by -0.4% however, it was a strong start to the year with retail trade increasing by 2.2% over the quarter, which was the greatest quarterly increase in retail trade since the three months to November 2009 (2.5%) and the strongest first quarter since 2007 (3.6%). Year-on-year retail trade has increased by 3.2%.
Latest National Auction Clearance Rates
Last week there were 1,749 capital city auctions, up from 1,658 the previous week. The combined capital city auction clearance rate was recorded at 67.7% last week, up from 64.5% over the previous week.
RP Data collected results for just over 88% of all capital city auctions which took place last week and last week was the highest combined capital city auction clearance rates since the week ending 2/5/2010 (71.7%).
In Melbourne, Australia’s largest auction market, the clearance rate was recorded at 70.4% last week which was up from 68.1% the previous week however, the number of auctions which took place fell to 822 from 845 the previous week.
In Sydney, the auction clearance rate increased to 72.7% last week from 70.6% over the previous week. Auction volumes across the city increased from 517 the previous week to 585 last week. Auction activity is set to fall this week, with our figures indicating that there will be 1,475 capital city auctions this week.
Advertised Stock on the Market
The number of new listings being added to the market increased by 9.0% over last week. 44,215 new listings were added to the market nationally, with 27,212 of these located in a capital city.
With the number of new listings increasing there was also a rise in total listings over the week. There were 285,925 homes advertised for sale over the past four weeks. Across the combined capital cities, there were 128,650 homes available for sale, 45% of the total stock available for sale.
New listings nationally are now -1.6% lower than they were a year ago and total listings are 0.4% higher than they were at the same time last year.