What Does Another Interest Rate Hold Mean?

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Again, the Reserve Bank has decided to leave the cash rate unchanged at 1.5% and again we will see the banks act on their own. Part of the reason for such a benign interest rate environment (at least for the RBA) was the recent CPI data which came in at just 0.5% or 2.1% for the year. This is only just within the RBA's desired band of 2.0%-3.0%.

There are however some bright lights on the horizon. The world economy is generally picking it up. Despite what we read in the newspaper about the Trump Presidency, the USA economy continues to gather momentum. There is the expectation that the next twelve months will see America raise interest rates at least once which will put downward pressure on the Aussie Dollar. Imports will become more expensive and exports will be cheaper for our purchasers. Not an altogether bad outcome.


Real wage growth continues to be slow which really does bring the question of property values to the fore. In addition to this the volume of part time roles continue to increase which is having quite a subdued effect on the economic recovery the government is banking on to decrease the deficit.

Talks of a housing bubble in Sydney and Melbourne won't go away, however the likelihood of a "pop" is somewhat remote so long as strong international migration continues. The Chinese appetite for new residential property remains robust with the author walking in on a Chinese Investor tour on the Gold Coast just this week.


One thing that has become particularly evident is that Developer's across the country are starting to get very nervous about the value of raw sites and what they have to pay to make them stack. As a result, the volume of developer site transactions is also going to slow over the coming 12-24 months which will slow the supply into the market, further aiding the RBA slowdown. Owner occupiers are again starting to become a larger part of the market which should indicate that the quality of property developments will also lift as liveability once again takes precedence.