RBA

The Reserve Bank of Australia (RBA) has dropped the official cash rate by 50 basis points at its Board meeting today, from 4.25 per cent to 3.75 per cent.

This decision was based on information suggesting that economic conditions have been somewhat weaker than expected, while inflation has moderated.

In the Residex release of its March housing market statistics and commentary last Friday, Residex CEO John Edwards predicted today’s outcome.

“The interest rate reduction is going to provide the much needed consumer confidence boost. Without some form of stimulus, we would have been likely to continue seeing housing values decrease across much of Australia. Today’s RBA decision should stop the heavy adjustment process which would have otherwise been inevitable in the Melbourne market, and it will help push all markets which were passed the bottom of the correction phase”.

Mr. Edwards went on to say, “Depending on the content of the upcoming Federal Budget and its assessed impact, a further 25 basis point adjustment could come in June”.

Residex does not expect the rate adjustment to cause significant house price rises in most markets due to unaffordability issues which will still remain.