RBA February 2017 rate decision holds rates at record low

The RBA held at its February 2017 meeting with the cash rate at 1.5 percent.

The hold decision from the RBA was widely anticipated, especially considering the strength in the housing market over the second half of 2016 as well as the consistent rise in investment activity since the latest round of rate cuts in May and August last year. 

With inflation consistently tracking below the RBA’s target range for almost three years, it’s likely that the heat in the housing market is one of the primary reasons why the cash rate hasn’t moved lower in an attempt to stimulate spending and push inflation higher, CoreLogic's Tim Lawless reported.

CoreLogic reported capital city dwelling values were 10.7% higher over the past twelve months, which is a substantially higher growth rate than the 7.4% recorded over the same period a year ago. 

Laing+Simmons Managing Director and REINSW President-elect Leanne Pilkington says the Reserve Bank had neither the justification nor the desire to reduce the official cash rate today after the rate cuts of last year.

Ms Pilkington believes further easing is not needed in the current cycle.

“Obtaining housing finance at attractive terms is already possible for those with the means. It’s those without the means – stuck in the rental cycle or unable to accumulate a suitable deposit – that face the greatest challenge in the market,” Ms Pilkington says.

“And further rate cuts are not a solution to the problem. Between Government and the industry, we need to table some alternative solutions to help people buy their first home.

“From a housing industry perspective, rates are already low and have been for some time, so that piece of the affordability puzzle is in place.

“It’s through other avenues like stamp duty reform that improvements in affordability need to be addressed,” she says.