Australian interest rate cut to boost property market

Photo credit: 8LettersUK

The Reserve Bank of Australia decided last week to drop its key interest rate to 2.25 per cent from 2.5 per cent, marking an all-time low.

"With Australia’s inflation pulse at its slowest in several years but domestic demand remaining weak, the RBA Board have today cut rates to provide an opportunity for the economy to grow at a stronger rate than might otherwise have occurred," comments Harley Dale, Chief Economist at the Housing Industry Association.

The move is one of several similar decisions by other countries, in what has been dubbed by some as a currency war. Indeed, the Housing Industry Association notes the Reserve Bank has indicated that the Australian dollar needs to fall further. However, the HIA are broadly optimistic that the rate cut will provide a positive impetus to the property industry.

"New residential construction has been the star performer of the Australian economy in recent years, generating considerable employment along the way, but wider domestic consumption and investment has failed to catch the ride," added Dale.

"A further ‘touch down’ to interest rates will help maintain very healthy levels of new home building while hopefully broadening the base of Australia’s economic growth."

Robert Larocca, Data Auction Market Specialist at CoreLogic RP, commented: "This week’s interest rate cut will provide a boost to the auction market over the coming month and deliver a welcome reprieve for buyers looking to reduce costs. Not only will buyers enjoy the increased purchasing power, sellers will welcome the unexpected boost to the market in the middle of their marketing campaigns."