Tim Lawless comments on today's RBA decision.
After two rates cuts already this year, the hold decision was widely anticipated, as the RBA monitors the effects of the record low cash rate on the economy and currency. The RBA is likely to be keeping a keen eye on the housing market; since the May rate cut and subsequent cut in August, many of the key housing market indicators have bounced higher. Auction clearance rates have returned to the highest reading in more than a year, albeit on lower volumes. CoreLogic’s hedonic index has seen some acceleration in the rate of capital gain across the already hot Sydney and Melbourne markets and the value of investor housing finance commitments have recently rebounded to the highest levels since August last year.
In contrast, there has been a consistent wind down in transaction numbers which implies market demand may be getting exhausted. While affordability barriers and tighter lending conditions are likely to be contributing to the slowdown in transactional activity, another factor is simply that there are historically low numbers of homes being advertised for sale in Sydney and Melbourne which is contributing to the upwards pressure in the market and limiting transaction activity due to low stock levels. With monthly indicators of inflation remaining low and the Australian dollar remaining relatively high, there remains a strong chance of another rate cut later this year. The most likely timing will be the November RBA meeting when September quarter inflation data is available. Another low inflation reading combined with a stubbornly high dollar could result in the cash rate moving lower.
Read the complete RBA Decision media release here.