In today’s board meeting the RBA has left rates unchanged after dropping rates last month. Their language was generally positive flagging the fact that they are unlikely to drop rates again soon. To read the whole release you can go here rba rate decision Glenn Stevens said
“In Australia, the available information suggests the economy has continued to grow, but at a rate somewhat below its longer-term average. Household spending has improved, including a large rise in dwelling construction, and exports are rising. But a key drag on private demand is weakness in business capital expenditure in both the mining and non-mining sectors and this is likely to persist over the coming year. Public spending is also scheduled to be subdued. Overall, the economy is likely to be operating with a degree of spare capacity for some time yet. With very slow growth in labour costs, inflation is forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.”
Meanwhile the property market in Sydney continues to go from strength to strength with many now calling the market as a bubble. The new secretary of the treasury of Australia Mr John Fraser said that Sydney’s property market is “unequivocally in bubble conditions” and that record low rates may be encouraging “over investment” in property. APRA (the Australian prudential regulation authority) who regulate the banks are also flagging the fact they are going to change some of the capital measures for banks – forcing them to keep greater reserves to protect against the possibility of a property crash.
What do you think? I am writing this from Melbourne so am quite insulated from the Sydney market but we are seeing a strong start to the year in Melbourne as well. Lets hope the market slides sideways for a bit rather than crashes as a true property crash in Sydney would be quite destructive to Mum and Dad Aussies wealth.
Author: Alan Maddick 2nd June 2015
