Interest rates are on hold again today after the June meeting by the Reserve Bank of Australia (RBA). Whilst most economists predicted no movement in the interest rates this month due to another steady month in retail figures and a falling Australian dollar.
It does appear likely that there will be more interest rate cuts to the already record low rate of 2.75% before the years end. A softening mining sector, subdued inflation, a weak manufacturing sector and falling in job advertisements suggest that the rates could be as low as 2.25% by the years end.
HSBC chief economist Paul Bloxham said the high Australian dollar was one of the factors the RBA cut rates at its May meeting. “Had the Australian dollar been at its current level when the RBA met last month, we suspect it may not have cut rates,” he said.
With a further reduction in interest rates in the coming months we will see house holds under less financial pressure and cash being freed up to help bolster the economy.
What would further interest rates cuts do to the housing sector? With the resources sectors now off the boil it is time to lift the building sector to help pick up the slack. Further rate cuts will help to drive consumer confidence and lift inflation, in turn we will see growth in housing prices which is great news for investors!