RBA rate announcement

By Vivienne Kelly

The Reserve Bank of Australia has announced the outcome of its second board meeting of the year.

Despite speculation that the central bank would be forced to take further action today, the cash rate will remain on hold at the historic-low of 2.25 per cent.

Twenty-one of comparison website’s 37-strong expert panel accurately predicted today’s outcome, despite 28 of 30 getting it wrong when rates were cut last month.

BIS Shrapnel’s Richard Robinson predicted that rates would remain steady and said the main driver behind the likely decision was the housing market.

“They will hold to avoid overheating the housing market and to keep their powder dry for when they might want to ‘encourage’ another drop in the exchange rate,” he said.

Ahead of the announcement ME Bank’s John Caelli said despite the inaction today, rates would continue to drop in 2015.

“It’s a 50/50 call. If they don’t act in March, they will cut in April. Rate cuts typically operate in cycles – you can expect more. What’s driving the fall is lower than forecasted growth and a desire to keep currency low,” he said.

Speaking about the decision, LJ Hooker CEO Grant Harrod said it would likely have little impact on the strengthening real estate markets across the country.

“Real estate comes down to the old adage of supply and demand and in many markets demand is still outstripping supply.”

He said the RBA is likely taking time to monitor the impact of last month’s cut, but predicted there were more to come.

The sluggish Australian economy, which is facing weaker non-mining business investment, unemployment and a rebounding dollar, should mean the cut comes in the first half of this year, he said.

Despite this, the property market will remain strong, he said.

“There is confidence when it comes to Australian property and we are continuing to see a large number of investors both locally and from overseas which is good news following last month’s cut.

“Investors are well researched and are looking for an investment which provides the lowest risk with the highest return potential and that currently is Australian property.”

LJ Hooker National Research Manager, Mathew Tiller, believes the RBA will act and drop rates but will firstly monitor the impact of its current policy on the Sydney and Melbourne markets.

“The good news for buyers is stronger prices means we should see an increase in listings over the autumn and winter market and this lack of stock has really been driving prices in markets such as Sydney,’’ Mr Tiller said.

“It could encourage empty nesters who have been sitting watching the prices steadily rise to finally take action and put their home on the market.’’

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