Interest rate held firm for November
The decision made by the Reserve Bank of Australia (RBA) this week to hold the interest rate at 3.25 per cent was not a popular one among certain property industry leaders.
RBA governor Glenn Stevens outlined the reasons behind the outcome in an official statement released following the meeting of the RBA board on Tuesday (November 6).
“Over the past year, monetary policy has become more accommodative. Interest rates for borrowers have declined to be clearly below their medium-term averages and savers are facing increased incentives to look for assets with higher returns,” he stated.
“At today’s meeting, with prices data slightly higher than expected and recent information on the world economy slightly more positive, the board judged that the stance of monetary policy was appropriate for the time being.”
It was the first time the official cash rate was not changed on Melbourne Cup Day in six years and was not the result many had hoped for.
The Housing Industry Association (HIA) was quick to criticise the decision, calling it a “disappointing” outcome.
“Today’s lack of action is inconsistent with the indication that was conveyed to households and businesses by a renewed easing of the interest rate in October, which followed a mid-year period of steady rates and mixed messages,” HIA chief economist Harley Dale charged.
Though Dr Dale did acknowledge that the RBA cannot fix the industry on its own and remarked on the various policymakers who need to intervene.
Real Estate Institute of Australia (REIA) president Pamela Bennett echoed that sentiment, pointing to state taxes, excessive red tape and land-release delays as adverse to a recovering housing market.
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It was interesting to read today that even though the basic rate has not moved to anywhere near the RB's reduction in rates but the investor's packages (under whatever name the banks use) have achieved a greater reduction (ie they have moved on from the standard 0.8% reduction and are offering 0.9%-1.0% depending upon what you can negotiate. Who needs the RB to shift rates when real competition for serious investors exists?