Feb rate cut unlikely

A majority of Australian homeowners do not expect the Reserve Bank of Australia (RBA) to cut the official cash rate when the board meets next week.

According to a survey conducted, 55 per cent of respondents believe the cash rate will remain at its current level of 3 per cent.

Of the 452 respondents, 35 per cent tipped the RBA to lower the official rate by 25 basis points, while 9 per cent thought the Bank would cut by as much as half a percentage point.

It’s very likely the RBA will apply the same wait and see approach it demonstrated throughout 2012 at its meeting next week. Most economic indicators are within targeted ranges and it appears homeowners aren’t convinced the RBA has enough evidence to lower interest rates.

The December rate cut certainly did help inject some confidence into areas of the economy and help spending and consumption over the holiday period. But like most interest rate movements, it takes time to assess the full impact as more data becomes available.
These results could indicate that households do not expect the economy to grow on the heels of RBA rate cuts alone.

Households have seen four rate cuts in the past year yet housing finance remains flat and sentiment remains quite cautious. If the government is looking to promote confidence in the economy it should look to ease concerns about the two-speed economy or home building.


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