RBA should have cut rates in September to boost housing market

The housing figures released today by the Australian Bureau of Statistics (ABS) show there’s been no response to the interest rate cuts of May and June.

Housing finance figures for July 2012 show, in trend terms, that the number of finance commitments has remained flat after six consecutive months of decreases.

In trend terms, increases were recorded in Victoria, Tasmania and the Northern Territory, however all other states and territories recorded decreases. The largest decrease was in Queensland (down 1% in trend terms) while the largest increase was in Tasmania (up 1.9% in trend terms.

Increases were evident for the construction of new dwellings (up 1% per cent in trend terms) and the number of commitments for the purchase of new dwellings (up 1.8% in trend terms). The commitments for the purchase of established dwellings fell by 0.2% (in trend terms).

The number of first-home buyers as a percentage of total owner-occupied housing commitments increased to 19.2% in July 2012, compared with 18.5% in June 2012. The long-run average proportion is 20.2%.

The value of investment housing commitments was also flat, in trend terms, in July after four consecutive months of declines.

These housing finance data figures indicate the RBA should have reduced interest rates again in September, as the market has not responded to the two previous cuts. With inflation within the RBA’s target zone and a more subdued international outlook, the message for next month’s RBA meeting is abundantly clear.