So the cash rate remains at near record lows of 2.5%. What does this really mean? What the RBA is telling us is that the economy is still in a transitional phase. They are happy to help stimulate the domestic economy whilst continuing to take pressure off the Australian dollar. There is a desire to see retail continue to grow after many years of difficult trading conditions. The housing market continues to show signs of a rebound in most capital cities with no real evidence of a bubble emerging just yet, yet being the operative word. If interest rates were to increase, the interest in residential property would have likely experienced a short term feeding frenzy as buyers looked to lock in interest rates and make their purchase before the market gets too heated. By holding off on raising interest rates, the market is left to minimal interference in the short term, probably a good thing. Our expectation is that interest rates are more likely to increase around the middle of the year when there is a clear direction on just where the Australian economy is at and how sustained the worlds economic rebound is. There is conflicting data coming out of America and China, two economies that need to be improving, particularly the former. Talk of an asset bubble in China and weak manufacturing data out of America continue to make forecasting challenging. One thing is for sure, 2014 should be a better year if youre in the cities, it may however prove challenging for many regional centres trying to make sense of the extraordinary investment activity that has left many towns in a position of massive oversupply.
Posted on: Tue, 04 Feb 2014 04:18:31 +0000
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