RBA makes July cash rate call
The Reserve Bank of Australia (RBA) has made its monthly cash rate call, deciding to hold the official rate at 1.5% for the 11th month running.
This decision was widely predicted with 34 out of 34 economists in finder.com.au’s monthly RBA Cash Rate Survey forecasting the non-move.
The general consensus seems to be that this will be the last hold call with 88% of economists polled by finder.com.au saying that the next rate move would be a rise.
Brokers were also fairly confident in a hold call with a monthly HashChing survey finding that 88% of more than 440 brokers thought rates would remain steady in July.
CoreLogic head of research Tim Lawless also said that the decision was unsurprising, pointing to lower unemployment, more job advertisements, low wage growth and below-target inflation.
The housing market is also showing signs of slowing, he said, with CoreLogic’s home value indices reporting a 0.8% rise in dwelling values over the June quarter – the lowest quarterly rate since December 2015.
“A controlled slowdown in housing market conditions would provide some comfort to policy makers that new macro-prudential constraints are working to cool the high rate of capital gains in Sydney and Melbourne.”
Despite the cash rate remaining on hold, Lawless said the same forecasts could not be made for mortgage rates which have been gradually increasing since September.
“Arguably, higher mortgage rates have done much of the heavy lifting in slowing down home value appreciation and cooling investment demand. There is an expectation that mortgage rates will continue to rise, despite a steady cash rate setting, as lenders adjust their credit policies to accommodate the latest round of APRA mandates.”
If this happens, investment activity will continue to moderate across the national housing market which may dampen conditions further, he said.
“Slower housing market conditions and improvements in employment markets are certainly positive outcomes, however if wages growth and inflation remain subdued we can expect the cash rate to remain on hold over the short term.”
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