Real estate group calls for rate cut

by Maya Breen29 Jan 2015
The Real Estate Institute of Australia argues the latest Consumer Price Index figures justify a cut in interest rates.  

December 2014 CPI figures show the RBA’s predicted inflation levels continue to be within its target zone.

“In the December quarter, the CPI rose by 0.2% and an annual rate of 1.7%,” REIA President Neville Sanders says.

“These figures are below the RBA’s target zone of 2-3% and should not put pressure on the inflation outlook.”
 
Mr Sanders said it could only be good news for home owners, “with inflation under control combined with a slow down in housing finance, it’s appropriate that the RBA Board seriously considers a cut in interest rates at their meeting next week.”

Controversy abounds among economists, with those agreeing with the REIA’s reasoning and others with reservations.

Housing Industry Association senior economist Shane Garrett agrees with REIA that an interest rate cut could be justified.

“Fewer price pressures in the economy mean that a policy of very low interest rates is both justified and necessary. This is against the backdrop of below trend economic growth and unemployment persistently above 6 per cent,” said Mr Garrett.

In contrast, CommSec economist Savanth Sebastian said, “the higher than expected readings on underlying measures suggest that the Reserve Bank will need to see a pullback in activity before deciding that a further cut in rates is necessary. CommSec expects rates to remain on hold over 2015.”

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