RBA stick with interest rate, QE policy at December meeting
The RBA have kept the official interest rate on hold at the final meeting of 2020, also reaffirming their previously announced quantitative easing policy.
RBA governor Philip Lowe said In Australia, the economic recovery is under way and recent data has generally been better than expected.
CoreLogic's head of research Tim Lawless says the RBA remains in ‘wait and see’ mode as the earlier heavy lifting on monetary policy flows through to the Australian economy.
"Labour markets are tightening, housing prices are broadly rising, credit flows are trending higher and consumers are more confident now than they were leading up to the pandemic," Lawless says.
"Most indicators are pointing towards a faster than forecast recovery thanks to record low interest rates along with ongoing fiscal support and containment of the virus."
As part of the Finder.com.au RBA Cash Rate Survey, AMP Capital economist Shane Oliver says the first rate hike is unlikely until sometime in 2024.
"Given that the cash rate is already at 0.1% and the RBA does not want to take it negative, the next move is likely to be a hike. But given the high level of spare capacity in the economy, inflation is unlikely to meet the RBA’s conditions for a hike of being sustainably within the 2-3% target range for another three years or so," Oliver says.
Since the last -0.15 per cent cash rate cut on November 3 which took the official rate down to a record low 0.1 per cent, financial comparison website Canstar have found that 25 lenders have cut variable home rates by an average of -0.17 per cent.
There have been significantly more cuts in the fixed rates as lenders seek to gain the market share.
Some 63 lenders have cut 1,138 fixed rates by an average of -0.31 per cent.
A number of lenders have reduced their floor rates to under five per cent, which Laing+Simmons managing director Leanne Pilkington says could potential deliver a major boost in borrowing capacity.
Pilkington, also the REINSW president, says however that the real winners are likely to be vendors.
“Vendors already have reason to be confident," Pilkington says.
"Clearance rates are strong, the supply shortage ensures a large buyer pool for available properties, strong prices are being achieved and low interest rates give buyers the confidence to proceed.
“Now, it appears those buyers will be able to borrow more. The buyer pool for properties coming to market potentially grows larger. More competition from more finance-ready buyers is great news for vendors.”
Floor rates are used by lenders to guide their assessment of a customer's borrowing capacity.
Finsure managing director John Kolenda says expectations of a spending spree in the lead up to Christmas this year also augured well for the domestic economy.
“There are some very positive signs of a rebound with consumer confidence and spending on the rise, which is an indicator we have likely seen the worst of the downturn,” Kolenda said.
“I expect the property market will be a strong feature of the national economy over the coming 12 months with strong results being recorded around the country.
“All signs across the economy indicate we might have hit the bottom and that rates have also hit that level and we are not likely to see any further easing in the foreseeable future."
