The Reserve Bank (RBA) released the minutes of their July board meeting earlier this week.
At their meeting the RBA decided to keep official interest rates on hold at 1.75% however, some of the comments suggest that a low June quarter inflation reading could trigger another interest rate cut in August.
This is highlighted by the following comments taken from the final paragraph of the minutes:
‘Taking account of the available information, the Board judged that holding monetary policy steady would be the most prudent course of action at this meeting.
The Board noted that further information on inflationary pressures, the labour market and housing market activity would be available over the following month and that the staff would provide an update of their forecasts ahead of the August Statement on Monetary Policy.
This information would allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate.’
This is a fairly significant departure from last month’s minutes where they stated: ‘…the Board judged that leaving the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time.’
Clearly as an inflation targeting Central Bank the Reserve Bank is aware of a potentially low CPI reading and, should it occur, a further interest rate cut may be imminent.
In relation to residential housing, the minutes noted:
In established housing markets, prices increased significantly in Sydney and Melbourne over April and May and, to a lesser extent, in a number of other capital cities.
Auction clearance rates and the number of auctions increased in May, but remained lower than a year earlier.
At the same time, the monthly data available for April showed that there had been a further easing in housing credit growth and the total value of housing loan approvals, excluding refinancing, had fallen in the month.
Members noted that the divergence in the trends in housing price and credit growth was not expected to persist over a long period of time.’
Over the week ending July 17 there were 1,391 capital city auctions with CoreLogic collecting results for 1,257 auctions, accounting for just over 90% of all auctions held.
The final clearance rate was recorded at 70.5%, which is virtually unchanged from 70.6% over the previous week across 1,399 auctions.
Last week, across Melbourne, 667 auctions were held with a clearance rate of 76.1%, Melbourne’s highest clearance rate since the first week of February this year.
Melbourne auction volumes increased from 619 the previous week.
Sydney’s auction clearance rate was recorded at 74.9% across 470 auctions with the clearance rate down from 76.5% across 512 auctions over the previous week.
Sydney’s auction clearance rate has been above 70% for 13 consecutive weeks while last week was the first time Melbourne’s clearance was greater than Sydney’s in 10 weeks.
Note that sales listings are based on a rolling 28 day count of unique properties that have been advertised for sale.
Relative to the same period last year, the number of new listings over the past twenty eight days is -12.4% lower on a national basis and the total volume of stock on the market is -0.8% lower.
Across the combined capital cities, new listings are -16.9% lower relative to last year, while total listings are 5.4% higher.
On a city-by-city basis, Brisbane (+1.2%) is the only capital city where new listings are now higher than they were a year ago.
In terms of the total stock available for sale, Hobart (-34.9%) and Canberra (-15.2%) are the only capital cities to have fewer total properties for sale than a year ago.
New listings across the combined capital cities and nationally increased slightly over the past week.
Total listings are at their lowest level in 26 weeks nationally and at their lowest level in 23 weeks across the combined capital cities.
Over the coming weeks we would expect fewer new listings as we head further into the seasonally quieter winter months.