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'The likelihood of a cut is increasing': experts predict cash rate moves

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'The likelihood of a cut is increasing': experts predict cash rate moves

by Sasha Karen 01 April 2019 1 minute read

April’s cash rate decision is expected to be a hold by many experts, with the exception of one, who predicts that we could see a decline as early as tomorrow.

RBA
April 01, 2019

According to comparison website Finder’s panel of experts, 32 surveyed experts claimed the cash rate on Tuesday would not move, while one, Stephen Koukoulas, economist at Market Economics, can see a cut.

“The economy has slowed, with the per capita GDP recession in the second half of last year probably continuing into 2019,” Mr Koukoulas said.

“Inflation is low and with the household sector under pressure from falling house prices, some policy stimulus is needed.”

While Mr Koukoulas was the only expert that predicted a cut for this rate decision, the momentum for a cut is increasing, as 76 per cent of surveyed experts predict the next move to be a cut, up by 1 per cent from the previous month’s 75 per cent.

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While Nerida Conisbee, chief economist of REA Group, also predicted a rate cut, she expects it later in the year rather than in this month’s rate decision.

“While the likelihood of a cut is increasing, this month is still too early,” Ms Conisbee said.

“If economic data continues to deteriorate, then we will likely see movement in the second half of the year.”

Ms Conisbee’s sentiments of the economy holding on long enough for no movement to make sense were also felt from the results of Finder’s economic sentiment tracker.

Assessing the five significant indicators – housing affordability, employment, wage growth, cost of living and household debt – the economic sentiment tracker registered positive in all five, resulting in the highest level of positive economic sentiment for housing affordability since the tracker was established in March 2018.

What does this mean for my property investment?

The potential of two rate cuts before the end of 2019, comes with the possibility of price decline, according to Finder’s survey.

In the survey, experts were surveyed on how they expected house and unit prices to move in Australia’s major capital cities.

According to the experts, Sydney houses were likely to see the largest price decline, falling 6.21 per cent to an estimated loss of $57,758.

Sydney units were not far behind, declining by 7.71 per cent to an estimated loss of $54,386.

Houses and units in Melbourne, Brisbane, PerthPerth, TAS Perth, WA and Adelaide are also expected to see declines, ranging from $48,947 with Melbourne houses to $7,345 with Adelaide units.

The only major capital city to see prices rise was Hobart, with house prices expected to go up 1.42 per cent to $469,559 and unit prices to go up 0.2 of a percentage point to $361,722.

Graham Cooke, insights manager at Finder, said that these conditions should mean those looking to enter the market may want to wait until further declines occur.

“Right now, there’s no need to jump on the first property you like. Use this time to save for your upfront costs,” Mr Cooke said.

“Look for value before you plunk down your deposit. Buying at the right time could potentially save you tens of thousands.”

Meanwhile, the current conditions could also make way for first-home buyers to enter the market.

“With the highest median house and unit price in the country, it’s not surprising that Sydney is expected to be hit hardest by the property downturn,” Mr Cooke said.

“If the predictions hold true, Melbourne and Sydney property still have another 6 to 8 per cent to drop this year. This means $60,000 more knocked off the average property price in Sydney.

“While this makes it harder for existing homeowners to build up equity, it could make Sydney an attractive market for first-time buyers with a deposit saved.”

'The likelihood of a cut is increasing': experts predict cash rate moves
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Sasha Karen

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