The market is divided on whether the cash rate will be cut or remain on hold at 1.75% when the Reserve Bank of Australia (RBA) meets tomorrow, however, an overwhelming majority believe First Home Owner Grant (FHOG) schemes should either be reviewed or abolished.
These are the results of the latest monthly Reserve Bank Survey conducted by finder.com.au, where 56% of analysts predict the RBA will cut the cash rate tomorrow while 44% believe the cash rate will remain on ice.
However, of those who believe the cash rate will remain unchanged, the majority (89%) are predicting a cash rate cut before the year is out, with many tipping it will come in November.
The majority of those surveyed (58%) predict the cash rate will bottom-out at 1.50% this cycle. But there are some starting to consider the possibility of rates falling lower than 1.5%, with 18% predicting the cash rate to bottom-out at 1.25%.
A further seven economists are predicting the rate to fall even lower this cycle, with Jordan Eliseo of ABC Bullion predicting the cash rate to hit 0.50% before it starts to rise.
Interestingly however, when asked about their views on first home owner grants and schemes across the country, 69% of experts said it’s time to review or abolish these schemes.
Graham Cooke, insights manager at finder.com.au, says there is a strong belief that First Home Owner Grant schemes push up house prices.
“The general view is that these grants artificially inflate the price of new dwellings at the cost of the taxpayer.
“The national homeownership rate has been declining and the First Home Owner Grant hasn’t solved Australia’s housing affordability problem. It could be time for the state and territory governments to review relevant schemes to provide greater accessibility for first buyers. Stamp duty discounts or land tax rebates may need to be revisited.”