The Reserve Bank has decided to again cut official interest rates to a
new record low of 1.5 per cent following the recent cut announced in May.
Although economic indicators released over the past month have been
largely neutral, the latest inflation data has confirmed underlying prices
growth well below the bank’s preferred range and has provided a clear catalyst
for the cut.
The national unemployment rate increased slightly over June but remained
below 6 per cent for the fourth consecutive month for first time in two years.
Following recent significant volatility, the share market has steadied
and is showing signs of a consistent recovery.
The trend for home building approvals for both houses and units has
increased but although still strong remains below the peak levels of last year.
The international economy although still fragile has moved on from the
volatility following the recent Brexit turmoil in markets.
Housing markets continue to benefit from lower mortgage rates with
robust buyer activity translating into recent solid pricegrowth in most
capitals. Auction activity has also increased in the majority of
capitalcities over July.
Although rates have been cut again this month, the likelihood remains
the bank will follow-up with another reduction in the near-term, particularly
if the labour market deteriorates and inflation continues to decline.
Andrew Wilson is Domain Group chief economist
Tuesday, 2 August 2016
