Rates on Hold

The decision to hold the cash rate steady came as no surprise.

From a housing market perspective, the current rate setting is clearly having the intended effect of encouraging more buyers into the housing market, stimulating new housing construction.

Transaction numbers are close to 20 per cent higher compared with a year ago and dwelling values across our combined capitals index have risen by 7.9 per cent over the past 12 months.

The RBA has, on several occasions now, stated they are comfortable with the level of capital gains in the housing market. In fact, the current rate of growth is well below the highs achieved over previous growth cycles and dwelling values across every capital city apart from Sydney remain below their previous peaks.

Recent positive data shows the economy is performing well at the current setting.

This positive data shows the Australian economy is performing very well at the current time, so it was unsurprising to see the Reserve Bank leave the cash rate untouched at the historically low level of 2.5 per cent.

The latest unemployment and inflation results as key indicators of the economy’s upturn.

Last month, the unemployment rate fell 0.1 per cent to 5.6 per cent, while the Consumer Price Index increased by 1.2 per cent over the September quarter, taking the annual inflation rate to 2.2 per cent – within the Reserve Bank’s target range.

Furthermore, the NAB Monthly Business Survey found business confidence strengthened considerably in September, hitting its highest level in three and a half years.


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