RBA holds rates at September meeting

The RBA have decided to hold the official cash rate at a record low one per cent at its September meeting today.

CoreLogic research director Tim Lawless said the resurgence in Sydney and Melbourne housing values was likely a key topic of conversation amongst the RBA Board at today’s meeting. 

"In line with rate cuts in June and July, housing values in Australia’s two largest cities have recorded a lift, with dwelling values rising 1.9% and 1.8% in Sydney and Melbourne over the past three months. 

"August data showed CoreLogic’s national index recorded its first month on month rise since October 2017 and five of the eight capital cities saw dwelling values increase. 

"Clearly housing market conditions are responding to lower interest rates as well as the recent loosening of loan serviceability rules from APRA and the positive influence of the stable federal election outcome. 

Lawless noted that the recovery trend is still very early and there is the potential for the pace of growth to slow as advertised stock levels rise in line with spring.

"If the recent acceleration in housing value growth is sustained over coming months, we could potentially see additional credit policy levers pulled, aimed at keeping a lid on household debt. 

"Limiting lending to borrowers on high debt to income ratios could be one option, or introducing hard limits on high LVR lending could be another mechanism that would reduce the risk of a further build up in household debt whilst at the same time allow borrowers to access housing credit and take advantage such low interest rates."

The Finder RBA Cash Rate Survey saw 95 per cent of their 41 experts and economists surveyed predict a cash rate hold in September.

Craig Emerson, of Craig Emerson Economics, said the RBA will save its last few bullets for now, but he predicts and October cut.

"The RBA will be reluctant to use up its little remaining ammunition," Emerson said.

Westpac's Bill Evans also recently suggested we should be looking to October for the cut.

Griffith University economics professor Tony Makin is one of 61 per cent of experts in the survey who believe the RBA will wait until November.

"Previous RBA research suggested it takes up to 18 months for the effects of official interest rate changes to feed through to the wider economy," Makin said.

“The RBA should therefore be waiting a little longer before cutting further, especially in light of the weaker dollar of recent weeks."