A big four bank has said the Reserve Bank is likely to stay “on the sidelines” with regard to lowering the cash rate, in light of an improved outlook for the property sector and an overall improvement in the Australian economy.
The latest ANZ-Property Council Survey noted that confidence in the property sector as well as more positive sentiment was evident across most states and territories, as the drag from the mining downturn reached its peak.
Consistent data showed NSW and Victoria were driving economic growth where housing markets remained solid, with confidence increasing in Western Australia after having plateaued at “historically low levels for the past year”, while in comparison, Queensland’s economy remained challenged by the mining investment downturn.
The survey also noted that while the outlook for Australian property “remains positive”, stricter lending policies for foreign buyers had resulted in a decline in the share of property being sold to foreign buyers, especially in the residential sector, where the reduction in total housing sales to these buyers fell to 21 per cent from 24 per cent last quarter.
Nevertheless, the survey noted that “a solid domestic economy and expectations of still-attractive price growth suggest that foreign buyers will continue to maintain a sizeable presence in the Australian market”.
“Overall, the survey supports our view that the RBA is likely to stay on the sidelines for the meantime,” said ANZ chief economist, Richard Yetsenga.
“As the drag from the mining sector reaches its peak, there is increasing evidence that economic growth is broadening outside the resources sector,” he added.
“The low level of inflation will keep the risk of a rate cut alive, but unemployment falling to the lowest level in three years, GDP growth running above 3 per cent and a strong housing market are likely to be sufficient to keep the cash rate on hold at the record low of 1.5 per cent.”