RBA Cash Rate
As we all know the RBA board decided to leave the cash rate unchanged at 0.75 per cent at its board meeting last week.
Financial markets had priced in a 5 per cent chance of a 0.25 percentage point rate cut. They have a full rate cut priced in for the next six months, despite the big four banks expecting one by February or earlier.
The key takeout for me is RBA Governor Philip Lowe comments “After a soft patch in the second half of last year, a gentle turning point appears to have been reached.”
Dr Lowe said that the central scenario is for the Australian economy to grow by around 2¼ per cent this year and then for growth gradually to pick up to around 3 per cent in 2021.
Factors supporting growth
“The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices in some markets and a brighter outlook for the resources sector should all support growth.”
That said the statement also says the outlook for the Australian economy is “little changed from three months ago”.
“The central scenario remains for inflation to pick up, but to do so only gradually. In both headline and underlying terms, inflation is expected to be close to 2 per cent in 2020 and 2021.”
And the central bank’s outlook for the global economy remains “reasonable”, though “the risks are tilted to the downside”.
“The US–China trade and technology disputes continue to affect international trade flows and investment as businesses scale back spending plans because of the uncertainty.”
Further info: https://www.rba.gov.au/media-releases/2019/mr-19-29.html
National housing values rising
According to Tim Lawless of Corelogic – “If housing values continue to rise at the same rate recorded over the past three months, national dwelling values could reach a new record high in six months’ time.”
“Based on CoreLogic’s Home Value Index, national dwelling values remained 5.7% below their peak at the end of October. With values rising by 2.9% over the past three months (averaging a rise of just under 1% per month), it would take approximately 6 months for housing values to return to their historic high.”
