Cash Rate – No change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 1.50%.

Australia’s economy during the last three months of 2016, influenced by improvements in iron ore and coal prices, bounced back from an unexpected 0.5% contraction in the September quarter to a healthy 1.1% growth in our GDP. The RBA is now hoping it is on track to achieving its 3% growth forecast later this year.

The current low rates have played a key role in Australia’s property boom, along with a decade of high population growth – on the east coast particularly.  Melbourne house prices have increased by 52% over the past 5 years (Sydney prices have soared 73%).  Overseas buyers are still very keen to purchase real estate in either of the two cities.

Notwithstanding the above, low wage growth and inflation levels well below the RBA’s target of 2% – 3% influences our view that the RBA will maintain the cash rate at 1.50% throughout 2017.  However, as we have stated previously, the Lenders may need to increase their interest rates further due to higher borrowing and capital costs created by APRA’s intervention.

For more information, or if you would like a free review of your residential, commercial or SMSF loans against other competitive products in the market please contact Peter, David or Simon via this email, our phone: (03) 9882 2500, or visit www.firstpointgroup.com.au