Further cash rate cut expected later in the year: RBA June 2019 meeting minutes

The RBA have suggested that the there will be another cut later in the year.

"Financial market pricing implied that the cash rate target was expected to be lowered by 25 basis points at the present meeting, with a further 25 basis point reduction expected later in the year," the RBA said in their June 2019 meeting minutes.

"Given the amount of spare capacity in the labour market and the economy more broadly, members agreed that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead."

The meeting minutes highlighted that the Coalition government win, paired with APRA's announcement that they will loosen their lending standards, will effect the housing market.

The RBA Governor Philip Lowe said in the June meeting minutes that it is too early to determine the overall effects, however he cited the auction clearance rates in Sydney "increasing noticeably following these developments."

"Members noted that the housing market was likely to be affected by the removal of uncertainty around possible changes to taxation arrangements relating to housing," Lowe said.

"They also considered the effects of the Australian Prudential Regulation Authority's (APRA's) proposal to amend its requirement for banks to determine the borrowing capacity of loan applicants using a specified minimum interest rate."

The RBA noted that building approvals declined further in April to be more than 20 percent lower over the preceding 12 months.

"This suggested that, even if there were a marked turnaround in housing sentiment, given the lags involved it would take some time for this to translate into higher residential construction activity," Lowe added.

Lowe said housing credit had stabilised in recent months, having slowed substantially over the preceding year.

One of the biggest segments the RBA were monitoring when considering cutting the official interest rate was the labour market.

"The data on conditions in the labour market in April had been mixed," Lowe said.

"Members noted the significant uncertainty around modelled estimates of the unemployment rate consistent with full employment.

"The unemployment rate had increased to 5.2 per cent in April from (an upwardly revised) 5.1 per cent in March.

"This followed a six-month period during which the unemployment rate had remained at around 5 per cent.

"The increase in the unemployment rate had been accompanied by an increase in the participation rate to its highest level on record.

To read the full minutes, click here.