The Reserve Bank of Australia (RBA) left the official cash rate on hold this month, and they expect the official cash rate to stay at 2.5 percent for at least another 12-months.
The official cash rate fell from 2.75 percent to 2.5 percent in August of 2013 and it’s remained there ever since. This was attributed to a number of international and Australian economic factors. The most pronounced being trade, retail sales, employment rates and housing.
Given that international markets and Australian trading partners are still rebounding from difficult economic times and that Australia is showing marginal economic gains in some areas, and declines in others, it is estimated that the official cash rate will stay on hold for some time.
On the international front, China is experiencing targeted growth with industrial production rates and retail sales remaining steady. But, fixed asset investment has declined and the Chinese residential property market has continued to weaken.
Output in Japan has decreased. This follows an increase in consumption tax. However, the economies of east Asia are continuing to grow. Whereas Europe still remains weak with high unemployment rates and little change in the health of their economy.
In Australia, commodity prices have fallen. Iron ore declined in price to recent lows and coal prices remain at their lowest prices.
The Australian labour market continues to remain subdued with unemployment increasing to 6.4 percent. Given that unemployment has remained at higher levels for some time, it is anticipated that it will take a number of months before signs of improvement are seen.
On the consumer front, consumption is increasing along with retail sales. This is favourable and indicates that consumer confidence is returning.
Investment in residential property is continuing to expand and it is anticipated that this will continue for some time to come. New dwelling loan approvals and first home buyer grants have increased strongly over the last 12-months, and dwelling approvals remain high despite declines witnessed in 2013.
Conditions in the established housing market are also continuing to strengthen. Housing prices are rising quickly due to increasing demand and marginal stock. In addition, auction clearance rates are above average. Housing credit is growing at a rate of approximately 7 percent, and investor credit is particularly strong. All, of which, indicate that now is a favourable time for property investment.
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Written by eChoice