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October cash rate announcement

By Jack Needham
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The Reserve Bank of Australia has announced its October cash rate decision, following a month of declining auction clearance rates and volatile share market activity.

The RBA has resolved to keep the official cash rate on hold at 2.00 per cent following its meeting this afternoon.

The decision is in line with the predictions of the majority of Smart Property Investment’s investment commentators.

Liz Sterzel, managing director of Property Wizards, said that changes to the political landscape and respectable retail spending figures meant it was too soon for the RBA to consider a downward shift.

“On the positive side, retail sales are up, the economy is moderating but still growing, and the new prime minister is aiming to restore confidence in the economy,” she said.

“The low Australian Dollar is helping the economy by making exports and tourism more attractive, and the record low interest rates are helping lift construction and services investment.”

Cate Bakos, of Cate Bakos Property, predicted that a slowdown in the housing market would negate any need for the RBA to shift rates up.

“Australian house price growth will slow in our two vibrant, fast-paced cities as a result of simple supply and demand. Spring sellers will increase in numbers and relative buyer numbers per house will reduce,” she said.

“To add to this force, the APRA changes are filtering through and concern around new apartments, off-the-plan settlements and developments in progress are forefront of many investors’ minds these days.”

Investor Jonathan Preston had predicted that if rates weren't cut today, they certainly will be in the coming six months.

“September brought about some interesting developments. ANZ stuck their neck out with the 1.5 per cent rate call, based on the idea that the unemployment rate is to rise rather than fall. There is also a lot of commentary coming out about auction clearance rates decreasing, which indicates that the property price concerns by the RBA will be somewhat alleviated,” he said.

“Lastly, with the US Federal Reserve holding off on increasing rates in the US, the AUD/USD is unlikely to drop significantly further in the short term, which is not what Glenn Stevens wants. All of this points to the next move being down. I don't necessarily expect it to happen this month, but if not this month then by March next year.”

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Jack Needham

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