October RBA cash rate announcement and John’s view on the market
The Reserve Bank has held the cash rate steady in October as business confidence and investment levels remain subdued, with negative world events continuing to impact global markets.
General economic activity in Australia and the uncertain global and local economic outlook remain the key factors in the Reserve Bank’s forward thinking about rate changes.
I believe the Reserve Bank will hold rates at their current low levels for a long time, with the next move expected to be down rather than up.
Interest rates are a great indicator of how the economy is travelling and the Reserve Bank will keep its powder dry on changes for the foreseeable future.
There is terrific volatility in global share and money markets and the Australian dollar continues to weaken, while household spending, consumer confidence and business confidence remain subdued.
Despite the global uncertainty and very patchy economic data, the Australian economy continues its 23 year run of growth – albeit at a very slow rate – with unemployment comparatively low compared with many other countries.
The China slowdown will continue to dominate economic news and influence where interest rates and currencies head in Australia and overseas for many months to come.
The low rates are causing a diverse array of activities – with older borrowers busily cutting their principal, while younger property buyers are being financially stretched in raising a deposit for properties in many areas – particularly Sydney and Melbourne – where prices continue to climb.
Meanwhile other property markets around Australia are quieter, led by the post-mining boom city of Perth.
I believe the high levels of price growth in Sydney and Melbourne are tapering off, with auction clearance rates dropping in the first weeks of Spring.
If you are looking to buy a property, I would not panic about being left behind as price growth is slowing or has stopped in some areas, and interest rates are likely to remain low.
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