The Reserve Bank of Australia (RBA) has just announced the September cash rate, following last month’s decision to hold at 1.0% in order to allow time to observe economic trends before resorting to further cuts.
The central bank has again maintained the 1.0% official cash rate.
The sharp increase in Sydney and Melbourne housing values was likely a key topic of conversation at today’s meeting, said CoreLogic research director Tim Lawless.
"Clearly housing market conditions are responding to lower interest rates as well as the recent loosening of loan serviceability rules from APRA and the positive influence of the stable federal election outcome,” Lawless said.
Nearly half of all borrowers (47%) communicated the June and July cash rate cuts lowered the interest rates on their home loans, according to Canstar data.
A further 31% knew the RBA cuts had taken place, but were unaware of the amount their interest rate was reduced by as a result, with just 9% communicating they were not aware the cash rate had been cut at all. The remaining 14% indicated their lender did not reduce their interest rate in response to the RBA action.
While recent housing data has been predominantly positive, Lawless warned against premature relief.
“The recovery trend is still very early and there is the potential for the pace of growth to slow as advertised stock levels rise in line with spring, so no doubt the RBA will be keeping a close eye on housing market conditions,” he said.
In the RBA’s recently released corporate plan for 2019/20, the central bank reiterated its duty to carry out monetary and banking policy in such a way as to best contribute to the stability of Australian currency, the maintenance of full employment, and the economic prosperity and welfare of Australians.
Further, it confirmed its commitment to achieving inflation between 2% to 3%.
Currently, Australia’s inflation rate remains well below this official target, with the Australian dollar continuing to weaken. The unemployment rate equals 5.2% for the fourth month in a row, and real wage growth remains low at 0.7%.
As such, many feel it is inevitable that additional rate cuts will come in the near future.
The Commonwealth Bank Group has predicted two further cuts in November 2019 and February 2020.