The RBA surprised a few pundits yesterday when they left interest rates unchanged at 2.5 per cent.
Despite plenty of economic indicators pointing to continued sluggishness, the RBA was perhaps worried about giving a further boost to the housing industry which was, on the flipside, showing strength.
The Melbourne property market certainly seems to have got a kick from last month’s rate cut, recording an auction clearance rate last weekend of 80.1 per cent.
St George Bank senior economist Janu Chan told The Adviser that she felt it was too much to expect back-to-back rate cuts.
“A rate cut over the next few meetings remains possible,” she said.
“The strength of non-mining investment, house prices and exchange rates will be the key focus for the RBA over the next few months.”
John Caelli from ME Bank also said he thought there would be further cuts in the near term despite today’s result.
“Rate cuts typically operate in cycles – you can expect more,” he said.
“What’s driving the falls is lower than forecasted growth and a desire to keep currency low.”
With the Melbourne property market showing strength after last month’s cut, there are eyes on the market now and whether the RBA’s decision to keep rates steady will stall the increased activity.
Century 21 in Bentleigh’s Michael Egan told The Age he thinks it is unlikely to affect Melbourne’s housing market.
“It’s my opinion that buyers in the Victorian market are currently quite bullish, and I really can’t see that changing very quickly in the near term,’ he said.
“Certain market factors, such as auction clearance rates which remain in the mid-to-high 70 per cent range, and the continued strong levels of foreign investment in my local area and its surrounds, signify a very healthy market in my opinion.”
Also speaking to The Age was BIS Shrapnel’s Angie Zigomanis. He said that he was expecting a rate cut yesterday but because of the strong clearance rates data that just came out it wasn’t a total surprise they were kept on hold.
Mr Zigomanis said he doesn’t think rates will be cut again if they aren’t reduced by the middle of the year.