Why the RBA didn't slash interest rates – Commentary by Sarah Megginson

By: Your Investment Property
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* St Leonards - New South Wales - Australia

ST LEONARDS, Australia - Feb. 3, 2020 - PRLog -- As widely expected, interest rates remained on hold today.

There wasn't a strong case for cutting them in the first Reserve Bank meeting of the new year, although some industry insiders did peg February as the month that we would see the cash rate slump to 0.50%.

I've seen some research and commentary from economists who believe we'll have another interest rate cut within by the end of financial year in June. However, I'm not sure what the point of this will be, or what this would accomplish?

The economy is chugging along, but it's not going exactly charging ahead.

Lagging employment and inflation figures, together with low wages growth, doesn't paint a picture of economic vibrancy. Access to credit (https://www.yourinvestmentpropertymag.com.au/news/price-growth-likely-to-slow-269793.aspx) remains tight, despite last year's interest rate cuts, and issues surrounding planning reforms, taxes, fees and stamp duty are still impacting consumer confidence in the property market.

Last year's rash of interest rate cuts had their desired impact on the housing market and saw Sydney and Melbourne rebound, but most economic metrics have been stagnant.

If the Reserve Bank sees enough motivation to lower rates again, there's no guarantee that the banks will pass them on, and it could achieve little more than moving us closer to a 0% cash rate – at which point, the Reserve Bank's levers are officially exhausted. The only place to go from there is quantitative easing.

Is cheaper credit really the answer from here? Time will tell.

For more information plus news and insights on all aspects of property investment, visit www.yipmag.com.au


Your Investment Property is the intelligent property owner's choice when it comes to learning about Australia's property market. Every issue features in-depth analyses of the market trends that affect your investment. Practical tips and advice on how to manage and finance your investments are also featured regularly to help you make the best decisions. You also get independent expert advice on the best investment strategies for you as well as market analysis from Australia's most trusted and experienced property experts. Plus, every month Your Investment Property carries exclusive information about Australia's up-and-coming property hot spots; real-life success stories of ordinary, hardworking Australians who have achieved financial independence through property; and the latest and most practical legal, tax and financial advice to help you invest safely. Published by the international media group Key Media, the question isn't whether you need Your Investment Property magazine – it's whether you can risk investing in property without it.

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