Sometimes no news is good news, and this is especially the case when the cash rate is left unchanged at historical lows. Following the record-breaking decision to cut the OCR by 25 basis points in May, the Reserve Bank of Australia (RBA) has decided to stay its hand at the latest meeting on June 2, resulting in a sustained period of accommodative monetary policy.
While RBA governor Glenn Stevens has left the door open to change in the future, pending analysis of forthcoming economic data, it seems the overwhelming trend is one of monetary policy that will stimulate growth in consumer and business demand. Basically, this translates into low rates for a while to come.
Whether or not we stay at this record-low, or further reductions are made, remains to be seen. Either way, the effects of last month’s decision are yet to be made evident in the data available and this lag may keep a lid on changes for the time being. This is great news for homebuyers, as home loans remain affordable.
Chief economist for the Housing Industry Association, Harley Dale noted that the hold of the cash rate was universally expected and was a good move by the RBA.
“Holding rates steady, with the door ajar for a further reduction if required, is the appropriate stance under current economic condition,” said Dr Dale in a 2 June statement.
“Housing demand will also be assisted by this highly favourable interest rate environment, which is very important given the new home building sector is providing a vital boost to an otherwise under-performing domestic economy.”
While it’s often touted that real estate in Australia is a significant driver of growth for the economy – just how much of impact does property make? According to research conducted by AEG Group on behalf of the Property Council of Australia, more than you may think!
The Economic Significance of the Property Industry to the Australian Economy report reveals that the sector has almost doubled its contribution to GDP over the last decade and is now the biggest contributor to the nation’s productivity.
“Our contribution to jobs and growth eclipses that of any other industry. One in four Australians draws a wage from property, either directly or indirectly,” said Ken Morrison, chief executive of the the Property Council, in a 2 June statement.
Mr Morrison went on to note that the transition from the resource boom means that the economy is relying on property to do well. If recent performance is anything to go by, he doesn’t have much to worry about.