Rates on Hold -reasons behind RBA decision [video]

The Reserve Bank of Australia (RBA) has announced it will hold the official cash rate at 2% in March.

The decision comes as global economic indicators continue to deteriorate.low interest rates

At the same time that the rate of capital gains has wound down across the Australian housing market and investor activity is reducing from the highs of mid last year.

Today CoreLogic released it’s latest stats showing capital city dwelling values rose by 1.4% over the most recent three month period and by 7.6% over the past twelve months.

This is a substantial slowdown from the strong housing market conditions that were evident over the first half of 2015.

If the RBA were to provide another cash rate cut later this year, they probably wouldn’t need to worry too much about over stimulating the housing market; mortgage rates are already higher than a year ago due to the higher capital requirements implemented by APRA and the pace of investment credit growth is tracking well below the 10% speed limit imposed in December 2014.

With inflation tracking around the bottom of the RBA target range of two to three per cent, the Reserve Bank can work to stimulate the economy by dropping the cash rate further if they see a requirement to do so.

Click the video below to watch Martin Lakos, Division Director, Macquarie Private Wealth, discuss the RBA’s decision.


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Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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