Cash rate to remain steady

The official cash rate is widely tipped to remain on hold ahead of the Reserve Bank of Australia’s board meeting this afternoon.

The official cash rate will remain on hold today, according to the predictions of all six of Smart Property Investment’s investment commentators.

Cate Bakos, principal of Cate Bakos Property, believes that investment and employment figures remain too low to warrant any upwards shift in the cash rate.

“While consumer confidence and retail spending is up, business investment [plant and equipment] is still down, employment has not increased, and house price growth has not increased,” she explained.

Even though trading conditions have taken a blow in recent weeks, Liz Sterzel, managing director of Property Wizards, believes that events in China are not significant enough to move rates down.

“A cut in rates due to Australian stock market volatility, poor company profits and China’s economic and stock market trouble is doubtful, as the RBA is more likely to watch how these scenarios develop into the future.

“Easing to put pressure on the dollar is unlikely as other forces have combined to take the dollar down to 71 cents, which is advantageous to the economy and exports. Inflation is under control, growth is mediocre but not different from expected. The devaluation of the yuan is a risk for exports, but the low Aussie dollar helps.”

Property academic and author, Peter Koulizos, believes that a lack of supporting data is what is preventing the RBA from dropping rates this month.

“In my opinion, rates will remain unchanged tomorrow. I think rates will drop again soon but the RBA doesn’t have enough data to date to support a drop in rates tomorrow,” he said yesterday.

Alan Fox, principal of buyer’s agency Propertunity, believes that the recent changes to investor lending have removed any onus on the RBA to move rates upwards.

“APRA’s actions have already caused the big four banks and Macquarie to raise interest rates on investor loans, so APRA has done their job for them. They’ll be adopting a wait and see approach in my view.

“The RBA will probably also want to see what impact the Chinese share-market meltdown will have, along with our own Australian share-market’s recent loss of all the gains made since the GFC,” he said.

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