No surprises as the RBA holds interest rates steady

With headline inflation within the target range, the Reserve Bank of Australia has taken a cautious approach to interest rates, keeping the cash rate steady ahead of the Easter holidays and the federal election.

LJ Hooker’s Head of Research, Mathew Tiller, said employment numbers and the overall strength of the economy had given the RBA little reason to provide mortgage holders with additional relief after cutting rates for the first time in almost three years back in February.

“While consecutive reductions would help to reduce the cost-of-living pressures, the RBA will want to keep something in reserve given the uncertainty around the global economic outlook driven by trade tensions and ongoing geopolitical conflicts,” Mr Tiller said.

“There’s still some price pressure in specific services with underlying inflation remaining slightly sticky, so this way, there is an ability to reduce rates should economic conditions worsen.”

Last year’s market ended on a softer note in anticipation of the widely speculated end to the RBA’s extended cycle of interest rate hikes. Activity picked up from mid-January in the lead-up to the February announcement, buoying both buyer and seller confidence.

Mr Tiller described the initial cut as a sugar hit and while auction clearance rates are currently holding steady at around 60 per cent, activity has started to moderate.

Adding to this, it is expected there will be a slight dip in property sales around the federal election. Mr Tiller said with no major policies on either side of politics likely to affect the property sector in the short term; the election outcome won’t have any significant impact on the market.

“Likely, the federal election will likely only cause a little blip in activity,” he said.

“However, we are in a similar position to the start of the year with buyers and sellers anticipating more rate cuts, and while transactions are still happening, it has eased off a little bit since that initial high of the first rate cut.

“Overall, we anticipate a positive outlook with a higher volume of listings this year compared to last year and at least one or two more rate reductions likely. Demand now only marginally exceeds supply, this does suggest that prices will continue rising gradually.”