An improvement in consumer sentiment combined with a robust property market, has encouraged the Reserve Bank of Australia to leave the official cash rate on hold.
At its September Board meeting, the Reserve Bank said it made sense to take a ‘wait and see’ approach to rates this month.
“It is clear the Reserve Bank is keen to see how last month’s rate cut plays out in the marketplace before making any further adjustments to the current monetary policy setting,” Mortgage Choice chief executive officer John Flavell said.
“Ultimately, the latest economic data has provided the Reserve Bank with no reason to alter the cash rate.
“Data from the latest Westpac Melbourne Consumer Sentiment Index found confidence was up 2% to 101.0 throughout August. While this jump in sentiment can more than likely be attributed to last month’s rate cut, it means optimists once again outnumber pessimists.”
And it is not just consumer sentiment that has improved over the last month, with data from National Australia Bank’s latest Business Survey showing business conditions and sentiment remain at elevated levels.
“Furthermore, the property market continues to go from strength to strength, with prices rising across most capital cities over the last 12 months,” Mr Flavell said.
“Moving forward, I would expect to see even more heat in the property market as buyers and sellers come out of their winter hibernation.
“The spring selling season is notoriously hot in Australia, and I expect this one to be no different.”
But while the Australian economy is showing signs of strength at the moment, Mr Flavell said future rate cuts cannot be ruled out.
“Depending on what happens both domestically and internationally, we could see the Reserve Bank cut the cash rate at least once more this calendar year,” he said.
“Regardless of what the Reserve Bank decides to do in the future, the fact remains that interest rates now sit at historical lows – making the cost of borrowing more affordable than ever before.”
For those thinking of buying property in the not-too-distant future, Mr Flavell said now was a great time to get onto the property ladder.
“For those with a mortgage who haven’t reviewed their interest rate in several years, now is also the perfect time to get a home loan health check to ensure you are still in the right product for your needs,” he said.