As widely anticipated, the Reserve Bank has left the official cash rate on hold at 1.5 per cent as the upcoming federal election gets closer and real estate in Australia readies itself for change, particularly in the event of a Labor win.
Australia’s top economists and market commentators were united in predicting another hold, including Leanne Pilkington, managing director at Laing+Simmons, who said the market is behaving quite peculiarly.
“There’s somewhat of a stand-off in the housing market at the moment,” she said.
“The level of buyer interest is encouraging but reduced accessibility to finance is having a dampening impact on transactional activity. While this issue runs deeper than merely the cost of finance, a hold pattern remains the prudent course for the RBA in the current climate.”
Head of corporate affairs at Mortgage Choice, Jacqueline Dearle, correctly predicted the RBA’s hold this month, and added that it is likely to do so until it gets a better handle on what’s really happening locally with consumers.
She also said that right now there are no major external drivers to shift.
“In February, the [US Federal reserve] left the key interest rate unchanged and said it would be patient in the face of a mounting set of risks, including slowing growth in China and Europe, Brexit, ongoing trade negotiations and the effects of the five-week US government shutdown,” Ms Dearle said.
“Back in Australia, the RBA’s prediction of 3 per cent economic growth this year and 2.75 per cent growth next year may be too optimistic.”
But Ms Dearle did say that softer growth numbers in our economy mean higher unemployment, which would suggest a rate cut down the track.
“The RBA will be keeping a keen eye on the housing market, especially the key markets of Sydney and Melbourne. With the housing adjustment threatening to spill over into the wider economy, the negative wealth effect may increase consumer desire to save and curb consumer spending, which in turn impacts retail and the wider economy,” she said.
AMP economist Shane Oliver said the RBA might have found itself in no-persons land at this month’s meeting.
“Things aren’t yet weak enough to push the RBA to cut but they aren’t strong enough to push it to hike either,” he said.
Chief economist at REA Group Nerida Conisbee also predicted today’s hold result, but said a rate move is brewing.
“Although the case is building for the next move to be a cut, I think that on balance, the data coming out is still too mixed,” she said.
“Unemployment is still very low even though we are still not seeing this flow through to consumer sentiment.”
Head of research at LJ Hooker, Mathew Tiller, said a move is coming but that now is too soon.
“Despite a deterioration in the outlook for the Australian and global economies, recent employment data shows that there are some economic bright spots,” he said.
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