What the experts are saying about the future of the cash rate

With the Reserve Bank’s decision to hold the cash rate for the fifth consecutive month, many industry commentators and economists are focussed on what the future holds.

As business confidence improves, most predicted that the cash rate would remain stable at the RBA’s October meeting - the first since Malcolm Turnbull became Prime Minister. But although, the RBA has been reluctant to cut rates further as it tries to avoid adding heat to the already overheated property market, many experts are predicting a further rate cut in the foreseeable future.

The Australian newspaper reported that ANZ economists expected the global markets to influence a rate change in the new year.

“The global and emerging market backdrop has become more challenging and will have a key influence on Australian growth.

“Support from the lower Australian dollar and the recent lift in housing investment is waning and growth in the non-mining economy does not look to be strong enough to erode spare capacity and offset the hit from further falls in mining investment,” ANZ economists said.

On the property markets, some industry experts have suggested the market could be turning to favour buyers.

Malcolm Gunning, the president of the Real Estate Institute of New South Wales is reported to have said that first home buyers are positioned to take the lead in NSW.

“It is now a buyer’s market. After a period of solid growth as a result of record low interest rates the tide has now turned in favour of those seeking to purchase property to live in.

“The limitations placed on investors are now filtering through the marketplace. Reduced competition from investors means first homebuyers and those seeking to upsize or downsize now have the upper hand,” he said on the Your Investment Property website.

This sentiment was echoed by AMP Capital Investors’ chief economist Shane Oliver and Domain’s Dr Andrew Wilson, who both agree that future rate cuts are unlikely to accelerate price growth any further.

“What happened earlier this year when the Reserve made a cut was a boost to both prices and auction clearance rates. I doubt if they cut again it would give a similar boost,” Dr Oliver told Fairfax media outlets.