RBA sets us up for a rate cut

The RBA capitulates

In a move nicely co-ordinated with APRA's proposed changes the Reserve Bank is now set to cut interest rates.

The RBA noted that unemployment can go lower than 5 per cent without raising inflation concerns.

And therefore it won't wait any longer, since interest rates need to be cut.

Markets are pricing at least a 90 per cent chance of rates being cut in a fortnight's time - and all four of the major banks are cut - which is as close to a lock as you'll ever see.

Fine-tuning was never on the agenda so it's reasonable to expect at least the "double tap" to follow in August, and possibly more to follow looking at market pricing.

The language today was explicit.

It's been quite a week, with Labor's planned suite of taxes consigned to the bin, APRA getting set to recalibrate the assessment rate, and the RBA indicating rate cuts.

The overuse interest-only loans issue has been decisively tackled.

So this just leaves RG209 and lender scrutiny of expenses as outstanding headaches in the mortgage market, but brokers and lenders will be feeling a lot happier with the world with Bowen and Shorten's changes out of the road.

About Michael Yardney 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 one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.