admin-ajax.php

3 Experts comment on the April 2017 RBA interest rate decision [Video]

The Reserve Bank of Australia has kept rates on hold at 1.5%.

The decision to leave the cash rate on hold today came as no surprise to those following our economy.

To better understand the decision, here are 3 experts views:

Martin Lakos ( Macquarie) comment: property interest-rates

The RBA’s monthly monetary policy meeting was held on Tuesday 4 April and the board decided to keep official interest rates on hold at 1.5%.

This decision was expected by Macquarie and the market generally.

The next RBA board meeting will be held on Tuesday 2 May.

Source: Macquarie

Tim Lawless (Corelogic) comments:

In a widely anticipated decision, the Reserve Bank has left the cash rate on hold at the record low setting of 1.5%.

It seems the RBA is stuck between a rock and hard place.  

ad_build_wealth

They aren’t likely to push rates higher just to quell housing market exuberance; doing so could push inflation lower and the Australian dollar higher as well as cancel out some of the much needed stimulus that many sectors of the economy are benefitting from.

On the other hand, the RBA would be loath to push rates lower out of concern for adding further fuel to an already over heated housing market.

With the cash rate likely to remain on hold, at least for the remainder of the year, it’s looking increasingly like other factors will be necessary to undertake the heavy lifting required to bring about a housing market slowdown.

Mortgage rates have been rising despite the steady cash rate, which will act as a disincentive to market demand.

The combination of higher mortgage rates, as well as firmer policy settings from APRA around investment lending, more scrutiny from ASIC on lending behaviour and tighter interestinternal lending policies for the banking sector are likely to take some heat out of investment demand.

Additionally, market driven factors including high apartment supply, record low rental yields and affordability constraints should gradually contribute to slower housing market conditions.

If the housing market continues to accelerate despite these combined factors, there is a very high likelihood of further policy announcements that will more firmly muffle investment demand.  Importantly, policy makers don’t want to dent investor demand so severely that unit settlements are adversely affected.

With more than 150,000 units currently under construction nationally, much of this new unit supply will be reliant on investor demand to be absorbed.

If lending conditions are too strict for this sector of the market, the risk of investors not being able (or willing) to settle will be heightened..

Comments from the RBA:

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy have improved over recent months.

Both global trade and industrial production have picked up. economy

Labour markets have tightened in many countries.

Above-trend growth is expected in a number of advanced economies, although uncertainties remain.

In China, growth is being supported by higher spending on infrastructure and property construction.

This composition of growth and the rapid increase in borrowing mean that the medium-term risks to Chinese growth remain.

The improvement in the global economy has contributed to higher commodity prices, which are providing a significant boost to Australia’s national income.

Headline inflation rates have moved higher in most countries, partly reflecting the higher commodity prices.

Core inflation remains low.

Long-term bond yields are higher than last year, although in a historical context they remain low.

Interest rates have increased in the United States and there is no longer an expectation of additional monetary easing in other major economies.

Financial markets have been functioning effectively.low interest rates

The Australian economy is continuing its transition following the end of the mining investment boom.

Recent data are consistent with ongoing moderate growth.

Most measures of business confidence are at, or above, average and non-mining business investment has risen over the past year.

At the same time, some indicators of conditions in the labour market have softened recently.

In particular, the unemployment rate has moved a little higher and employment growth is modest.

The various forward-looking indicators still point to continued growth in employment over the period ahead.

Wage growth remains slow.

The outlook continues to be supported by the low level of interest rates.

Lenders have recently announced increases in mortgage rates, particularly those paid by investors.

Financial institutions remain in a good position to lend.property market

The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom.

An appreciating exchange rate would complicate this adjustment.

Inflation remains quite low.

Headline inflation is expected to pick up over the course of 2017 to be above 2 per cent.

The rise in underlying inflation is expected to be a bit more gradual with growth in labour costs remaining subdued.

Conditions in the housing market continue to vary considerably around the country.

In some markets, conditions are strong and prices are rising briskly.

In other markets, prices are declining.

In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years.property mortgage finance money

Growth in rents is the slowest for two decades.

Growth in household borrowing, largely to purchase housing, continues to outpace growth in household income.

By reinforcing strong lending standards, the recently announced supervisory measures should help address the risks associated with high and rising levels of indebtedness.

Lenders need to ensure that the serviceability metrics that they use are appropriate for current conditions.

A reduced reliance on interest-only housing loans in the Australian market would also be a positive development.

Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Source: www.rba.gov.au



icon-podcast-large

SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

icon-email-large

PREFER TO SUBSCRIBE VIA EMAIL?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Avatar for Property Update

About

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


'3 Experts comment on the April 2017 RBA interest rate decision [Video]' have no comments

Be the first to comment this post!

Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*

facebook
twitter
google
0
linkedin
0
email

Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...

REGISTER NOW

Subscribe!