Market Watch: Renewed calls for RBA to cut interest rates

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Calls for rate cuts as inflation figures fall… but not as far as expected
There are renewed calls for the Reserve Bank of Australia to cut interest rates with new figures showing the inflation rate dropped in December to 1.7 per cent from 2.3 per cent in September. However the underlying rate which excludes items such as petrol, which has seen a large drop in price, has risen by 0.7 per cent. That figure is higher than expected and may mean that the RBA is more cautious when it announces its interest rate decision next week.

Savanth Sebastian from CommSec told The Australian that “The higher-than-expected readings on underlying measures suggest that the Reserve Bank will need to see a pullback in ­activity before deciding that a further cut in rates is necessary.” Meanwhile the Real Estate Institute of Australia president Neville Sanders says that the figures suggest that it’s time for the central bank to take action: “With inflation under control combined with a slow down in housing finance, it’s appropriate that the RBA Board seriously considers a cut in interest rates.”

The Housing Industry Association agrees that it’s time for a cut. Senior economist Shane Garrett said: “Fewer price pressures in the economy mean that a policy of very low interest rates is both justified and necessary. This is against the backdrop of below trend economic growth and unemployment persistently above 6 per cent.”

Sources: The Australian;REIA;HIA
Mortgage delinquencies fall in most areas
The number of Australians falling behind with their home loan repayments fell to 0.90 per cent in September last year from 1.35 per cent in March. The new figures, released by ratings agency Fitch, show that while the overall national figure is down there are regional differences. Queensland is the worst-performing state followed by Tasmania, South Australia, Victoria, NSW, Western Australia, the ACT and the Northern Territory. Lower oil and petrol prices have taken some pressure off household budgets.

Source: Sydney Morning Herald
Sydney house prices up 14 per cent
House prices in Sydney increased by 14 per cent last year according to figures from the Domain Group. Its senior economist Dr Andrew Wilson is predicting that strong growth will continue this year with prices rising by 7 to 10 per cent. The figures show that the median house price rose 4.1 per cent in the December quarter to $873,786. Apartment prices increased by 2.9 per cent in the last quarter and 10.4 per cent over the year to a median of $597,668.

Source: The Domain Group


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