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Tech & Science Reserve Bank keeps interest rates on hold

12:51  03 december  2019
12:51  03 december  2019 Source:   abc.net.au

First home buyers to suffer from low rates

  First home buyers to suffer from low rates Record-low interest rates are likely to spike house prices. Here's why.Known as "quantitative easing", the RBA has taken several actions to try and stimulate the Australian economy, including cutting interest rates three times in a year to the current level of 0.75 percent.

Rebounding house prices have painted the Reserve Bank into a tight corner, potentially undermining the prospects of further interest rate cuts. As expected, the RBA board, at its final meeting for the year, kept rates on hold at the historic low of 0.75 per cent. The RBA stared down increasingly

The Reserve Bank has kept interest rates on hold for a record 21 consecutive months. The cash rate was last cut in August 2016 and Tuesday’s decision In its statement explaining its decision to extend the record breaking run on rates the board noted that employment was growing strongly but wage

People walk past the Reserve Bank Australia office in Sydney on March 19, 2008. Australia's economic growth is likely to slow later this year, removing pressure on the central bank to lift interest rates, a survey released at March 19 predicted.The Reserve Bank of Australia lifted rates 0.25 points to a 12-year high of 7.25 percent in March, the 12th rise since mid-2002, as it attempts to keep inflation within its 2.0-3.0 percent target range amid a resources boom fuelled by unprecedented demand from China.  AFP Photo/Anoek DE GROOT (Photo credit should read ANOEK DE GROOT/AFP/Getty Images)© 2008 AFP People walk past the Reserve Bank Australia office in Sydney on March 19, 2008. Australia's economic growth is likely to slow later this year, removing pressure on the central bank to lift interest rates, a survey released at March 19 predicted.The Reserve Bank of Australia lifted rates 0.25 points to a 12-year high of 7.25 percent in March, the 12th rise since mid-2002, as it attempts to keep inflation within its 2.0-3.0 percent target range amid a resources boom fuelled by unprecedented demand from China. AFP Photo/Anoek DE GROOT (Photo credit should read ANOEK DE GROOT/AFP/Getty Images) .

Rebounding house prices have painted the Reserve Bank into a tight corner, potentially undermining the prospects of further interest rate cuts.

Australia's central bank chief says negative rates 'extraordinarily unlikely'

  Australia's central bank chief says negative rates 'extraordinarily unlikely' IMF-G20-AUSTRALIA-INT:Australia's central bank chief says negative rates 'extraordinarily unlikely'"I'm not going to speculate on ... negative interest rates and quantitative easing in Australia, other than to say that negative interest rates are extraordinarily unlikely in my country," Lowe said during a presentation at the International Monetary Fund and World Bank fall meetings in Washington.

Follow the lead up to the Reserve Bank ’s announcement on interest rates , which this time is expected to be cut a record low of 2.0%. The RBA gave few new reasons for its decision. It essentially released the same statement as it did last month – when rates were also kept on hold .

Follow the lead up to the Reserve Bank ’s announcement on interest rates , which this time is expected to be cut a record low of 2.0%. The RBA gave few new reasons for its decision. It essentially released the same statement as it did last month – when rates were also kept on hold .

As expected, the RBA board, at its final meeting for the year, kept rates on hold at the historic low of 0.75 per cent.

The RBA stared down increasingly disappointing economic data, preferring to "wait and assess" the impact of the three cuts delivered since June.

While the rate cuts have failed to move the dial on unemployment — which has ticked back up to 5.3 per cent — wage growth or retail sales, it has put a rocket under house prices again.

CoreLogic's December survey found prices nationally have risen 4 per cent in the past three months, while the more expensive and indebted markets of Sydney and Melbourne have jumped by more than 6 per cent.

"I think there is a bit of a fear of missing out now in the market," SQM Research managing director Louis Christopher said.

Australian consumers turn slightly less gloomy in November - survey

  Australian consumers turn slightly less gloomy in November - survey Australian consumers turn slightly less gloomy in November - surveyThe index was still down 7.0% from a year earlier, and at 97.0 indicated pessimists continued to outnumber optimists.

Follow the lead up to the Reserve Bank ’s announcement on interest rates , which this time is expected to be cut a record low of 2.0%. The RBA gave few new reasons for its decision. It essentially released the same statement as it did last month – when rates were also kept on hold .

The Reserve Bank has kept its official interest rate on hold , despite indications the economy slowed sharply over the June quarter. The RBA board decided to

"There's a real possibility here that the prices in Sydney and Melbourne are going to continue to fire up right throughout 2020 before we see any action from [prudential regulator] APRA."

Larissa, who works as a lawyer in Sydney, said she has seen the dramatic turnaround in prices over the past year first-hand, as she struggles to buy a first home with her partner.

"Every new house that comes onto the market, I feel a need to immediately go see, because they're going really quickly and there's not much new stock coming on," she said.

"My hope is that it will be better next year, but you never know and it seems to really be driving up the prices.

"There is a real fear, and I think it's driving the prices up."

Rising house prices generally require rising mortgage debt to pay for them.

The RBA has repeatedly cited high household debt as one of its greatest concerns.

The fear of further inflating house prices and debt was one of the key reasons behind interest rates being kept on hold for almost three years, despite below average economic growth and inflation remaining well below the RBA's target band during that period.

"Household debt-to-income is around 200 per cent, household debt-to-GDP is around 120 per cent and even through house prices declined somewhat over the last 12-to-18 months, those levels are still high," IFM Investors chief economist Alex Joiner said.

"I think the risk is that lower interest rates still from the Reserve Bank, and lower interest rates for an extended period of time, risk exacerbating that household debt issue that we have in the economy."

Robust economy may embolden Trump to push for tougher deal with China .
With the US jobs market running hot, President Trump appears to hold a stronger hand in negotiations with China ahead of a key tariff deadline.“There’s been some concern the US labour market was turning over following weakness in the manufacturing sector seen since July and August. We know the manufacturing sector is pretty much in recession and part of that is due to the ongoing impact of the trade dispute,” Mr Attrill said.

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