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Reserve Bank June 2017 Rate Announcement.

Australia Reserve Bank Boardroom

The decision

The Reserve Bank of Australia (RBA) Board today announced their cash rate decision. North Queensland and Townsville home owners and buyers receive no interest rate relief.

In a move that was widely predicted, the RBA has retained the current official cash rate at 1.50%.

The RBA is expecting economic growth to continue over the next few years at 3 percent. Lower wage growth is expected to continue also which will constrain household consumption.

In the RBA’s statement impacting housing markets, the board said:

“Conditions in the housing market vary considerably around the country. Prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease.”

In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years.

Rent increases are the slowest for two decades. Growth in housing debt has outpaced the slow growth in household incomes. The recent supervisory measures should help address the risks associated with high and rising levels of indebtedness.

Lenders have also announced increases in mortgage rates, particularly those paid by investors and on interest-only loans.”

Expert opinion

Property market prices in the capital cities have been too high, and with underlying inflation at 2% expected to remain over the next couple of years, an increase in rates had no case for justification.

AMP Chief Economist said: “Not enough has changed since the last meeting, which saw the Reserve Bank get more optimistic about growth and inflation, and the fact that its too early to declare victory concerning the Sydney and Melbourne property market will lead to a situation where they’ll leave rates on hold.”

CoreLogic’s head of research, Tim Lawless predicted a hold verdict but predicted a cut was likely in the future. He pointed out that “softer housing conditions” in the Sydney and Melbourne housing markets are factors contributing to “further support to the motion that house price growth has moved through its cyclical peak”.

The softer prices in Sydney and Melbourne should make it easier on the RBA Board to lower interest rates in other sectors, which is where the pressure for an interest rate cut is needing to go, Mr. Lawless suggested.

Local outlook

The soft housing market conditions are certainly the case in North Queensland where interest rate easing could help struggling mortgage holders and support investment in the economy. The supervisory action referred to by the RBA refers to the banks independently increasing retail interest rates on some of their investor products.

With the Sydney and Melbourne housing markets easing and a substantial new supply of apartments stock expected to roll out in these markets over the next twelve months, other sectors such as retail, construction and regional housing markets like Townsville might see the next rate decision ease the cost on financing and trigger increased activity.

However, many experts are predicting that the next interest rate change will be up sometime in 2018 but a small number of experts felt an October to December board decision will see rates increasing.

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Aaron M, Editior
Aaron is the founder and editor of TREN eMagazine with 15 years experience in the real estate industry investing and helping investors seek value, leverage value and capitalise on value, developing professional and technical skills and capabilities that have enabled his success in business from startups, adoption, asset growth, management and community leadership projects. Aaron also loves travelling, sports, his partner Jodie and helping people discover their "why" and find their few "what's" in life that realise the "wows. The " www" in is one of his why, what and wow's that strive to add valuable content and analysis for readers to participate and win.

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