The Reserve Bank’s decision to keep the official cash rate on hold at 4.25 per cent yesterday has been slammed by industry experts.
A rate cut would have been a much needed boost for property owners paying off mortgages, said Real Estate Institute of Australia president Pamela Bennett.
"A rate cut would have assisted those who are struggling with a mortgage and would have been the catalyst needed to encourage more first home buyers into the market," said Ms Bennett.
Ms Bennett explained that first property investors are beginning to return to the market, but that the activity is still half of the 2009 peak.
"A further reduction in interest rates would have assisted in stimulating the lower end of the market and would have made buying a home a more affordable option for young Australians," she said.
“Although just one component of the solution to housing affordability, lower interest rates are needed to reduce the proportion of income that Australians are spending on loan repayments in an effort to improve the worsening affordability situation.”
Speaking about the rate decision, Housing Industry Association chief economist Harley Dale said the fractured state of economic conditions in Australia means there is considerable pain being felt by small and medium sized businesses, as well as some large businesses, which tends to get lost in a general focus on aggregate economic outcomes.
“Against this backdrop a rate cut today would have been the appropriate action to take,” he said.
“As it stands, the widely held expectation coming into 2012 of some further interest relief has been replaced by an apparent hold on official rates, while businesses and households count the potential cost from the possibility of further out of tune rate hikes by the banks.
“That doesn’t seem to be a healthy recipe for domestic economic activity, within which the risk of new residential building revisiting GFC-equivalent lows has increased over 2012 to date.”