August 06, 2019
The Reserve Bank of Australia (RBA) has made the decision to leave the nation’s official cash rate unchanged at 1.00%.
Mortgage Choice Chief Executive Officer Susan Mitchell said, “The Reserve Bank’s decision to hold the cash rate steady this month was prudent. A third cut so soon after two consecutive cuts in June and July would not have given policy makers enough time to see if the cuts had any marked effect on the economy.
“The latest economic data has provided the Reserve Bank with no incentive to reduce the cash rate three times in as many months, encouraging the Bank to continue its historically cautious approach towards monetary policy.
“In encouraging news for the housing market, the latest CoreLogic Hedonic Home Value Index revealed that national dwelling values stabilised in July as five of the eight capital cities recorded a rise, supported by a 0.2% increase in values in both Sydney and Melbourne.
“It seems that two consecutive cuts to the cash rate, and tax relief from the Government were not enough to improve consumer outlook. The Westpac Melbourne Institute of Consumer Sentiment revealed that consumer sentiment deteriorated in July, as concerns over the economy continue to weigh heavily on sentiment. On a positive note, the index revealed that housing-related sentiment improved in response to lower interest rates.
“The latest monthly business survey from the National Australia Bank revealed that business confidence fell over June and while business conditions rose, they remain well below average. The survey also revealed that outlook for business conditions over the next few months is weak, which may put further downward pressure on the labour market going forward,” said Ms Mitchell.
In the minutes of its July Board meeting, RBA board members suggested they continue to track developments in the labour market. Members agreed that the Australian economy could sustain a lower rate of unemployment, while achieving inflation consistent with the target.
Ms Mitchell said, "Given that the unemployment rate remained steady at 5.2% in the ABS’ most recent Labour Force Survey, the RBA may not have felt another cut was necessary at this time.
“That being said, the inflation rate came in under the RBA’s expectations once more, with June quarter figures revealing a CPI quarterly percentage change of 0.6% and a year ended percentage change of 1.6%, well below the RBA’s target range of 2-3%.
“While financial markets are expecting another 25 basis point cut this year, the important thing for borrowers and future borrowers alike to keep in mind is that interest rates are currently sitting at historic lows.
“I would encourage anyone thinking of buying a home or investment property to speak to their local Mortgage Choice mortgage broker to learn what their borrowing power is and what home loan options are available to them.
“Mortgage Choice brokers can assess your financial situation, and help you get home buying ready. With access to a panel of over 25 lenders, with varied lending policies and preferences, we can help borrowers get the most suitable deal for their circumstances, whatever the cash rate,” concluded Ms Mitchell.