Rates to continue to fall
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1 minute read

Rates to continue to fall

Rates to continue to fall

by Reporter | August 21, 2016 | 1 minute read

With a number of housing markets presenting ‘challenging’ conditions, the central bank is likely looking to reduce the cash rate even further.

RBA cash rate
RBA cash rate
by Reporter
August 21, 2016

Despite Sydney and Melbourne’s housing markets beginning to heat up again, Shane Oliver, chief economist at AMP Capital notes that the central bank needs to cater to “the average of Australia” and not just focus on “house prices in two cities”.

Sydney and Melbourne have seen a pickup in investor lending activity and auction clearance rates have remained high, prompting Mr Oliver to warn that “returning to rapid house price gains at a time when the supply of apartments is starting to surge would not be a good thing”.

Mr Oliver did however remind investors that Sydney itself isn’t one market performing well across the board, flagging he’s “[heard] that western Sydney isn’t so strong”.

With the mixed performance of the housing market, but investor activity remaining high, Mr Oliver predicted pressure will shift from the RBA back towards the Australian Prudential Regulation Authority (APRA) to “further tighten lending standards”.

The RBA will, however, also need to weigh up concerns regarding jobs growth, unemployment, underemployment and wages growth as 2016 wraps up, Mr Oliver noted.

“Given this and the ongoing downside risks it implies for inflation we remain of the view that the RBA will cut the cash rate again in November to 1.25 per cent,” he said.

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