Dwelling values are dropping in most capital cities. Sydney leads the way, with home prices now down 9.5% over the past year.
Many homeowners have been hoping the Reserve Bank of Australia (RBA) will come to their rescue by cutting interest rates below the current record low 1.5%. But they’re likely to be disappointed.
RBA insists on an upward trend for Aussie cash rate
As reported by RAW, Christopher Kent — RBA’s assistant governor — was questioned in Sydney at a Bloomberg event regarding the likelihood of a further interest rate cut next year. His response was not the one we were hoping for:
‘We have said that it’s likely the next move is up, it doesn’t mean if it’s needed the next move might not be down.
‘But that’s not in our forecasts, which are for a gradual fall in unemployment and a gradual rise in inflation. And that’s why the next move will likely be up.’
Of course, recent soft economic data for our country points towards a cut being in our favour. But the RBA are constantly reiterating their belief that further cuts will do nothing but fuel an Aussie debt binge in our housing market.
They continue to do this, even with our country on a brink of another property market collapse.
An optimistic forecast from RBA leaves us guessing
Kent claimed that our recent market move is ‘modest’ in the grand scheme of things, alluding to a cut being a kind of overreaction to a single quarter of data.
But that’s like telling someone to refrain from taking antibiotics until the infection spreads to the other leg.
Kent also noted that the forecast for unemployment and inflation still looked positive. Though he did admit that progress towards meeting the bank’s targets would be gradual.
That’s just a nicer way to say…inefficient.
As to the housing market specifically, Kent claimed the risks lie in banks tightening credit because of the negativity surround the Banking Royal Commission.
Way to flick the blame onto someone else.
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