The Reserve Bank of Australia’s decision to slash the official cash rate to a new historic low is positive news for both the economy and borrowers, according to a number of industry professionals.
At yesterday’s monthly board meeting, the RBA decided to cut the cash rate to 1.75 per cent – the first move since May 2015.
“In reaching today’s decision, the board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate,” RBA governor Glenn Stevens said.
“At present, the potential risks of lower interest rates in this area are less than they were a year ago.
“Taking all these considerations into account, the board judged that prospects for sustainable growth in the economy, with inflation returning over time, would be improved by easing monetary policy at this meeting.”
LJ Hooker chief executive Grant Harrod welcomed the decision, saying it would help boost the weaker Australian economy.
“The RBA will be comforted that recent ‘out of line’ mortgage rate increases by the banks and tightening of investment loans and foreign lending will not stoke property price growth,” Mr Harrod said.
“Both the Sydney and Melbourne markets are slowing so the RBA is less concerned by suggestions of overheating and are now focused on broader economic fundamentals and what is happening overseas.”
Mr Harrod said the rate cut would provide further support to Australian borrowers and encourage more first home buyers to enter the property market.
“It will improve overall confidence and allow people to get ahead on mortgage repayments and increase mortgage affordability for everyone. However, we don’t expect to see another huge jump in property prices,” he said.
Domain chief economist Andrew Wilson echoed Mr Harrod’s comments and welcomed yesterday’s announcement.
“Changes to the rate indicates that the [RBA] is acting to stimulate an underperforming economy,” Mr Wilson said.
“Although the recent tightening of bank lending conditions has contributed to weakening property price growth, low interest rates are continuing to support housing market activity and remain a real positive for the property market.”