Interest Rates

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Australia has always been a nation which places a high value upon home ownership. Traditionally, ‘The Great Australian Dream’ has been achievable for the average family on one wage. The last 20 years economically have had ups and downs, but with today’s rising population and an increased cost of living – that dream isn’t as obtainable as it once was. Today’s Chisholm & Gamon blog explores the market pressures behind the shift in buying behaviour, and why the RBA suggests another rate rise is imminent.

Chisholm & Gamon are fortunate to work in Melbourne’s blue chip band of desirable suburbs. We find buyer’s demand for our location has created an environment in which our vendor’s residences continue to perform well on market. The clearance rates Victoria wide have been considerably lower than their 2010 peaks however – indicating that in some regions of the state, demand is weaker than expected. Unlike America, Australia’s economy managed to recover with some aplomb from the GFC – our sensible lending practices minimised the risks to our banking sector. After a period of time at low interest rates, the RBA has been regularly lifting the rate by .25%. Why, one might ask, would rates continue to rise now that we are a distance from emergency rates – and the broad property market continues to be moderate? News.com.au suggests that the RBA is continuing to raise rates in response to confidence from the business markets which are still loaning steadily. The Australian economy contracted after horrific Queensland Floods and Cyclone Yasi – simultaneously our national coal exports dropped by 27%. The Australian dollar is still popular on the international currency market and proves to be the flavour of the month, trading at $US1.0742. Despite this, the RBA remains firmly with their hand on the ‘rates lever’ – with many economists expecting a rise in August. The reason? Private lending is up by 1.3% and business lending is trending strongly at 2.8% – plus personal savings are increasing nationally. Perhaps we’ve learned our lesson from the global financial crisis – the only question is when will the rates stop going up? We hope that the reserve bank will look beyond the inflation rate mantra and accept that most home buyers, retailers and small to medium-sized business could benefit from a hold on interest rate rises.

TAGS: RBA, Chisholm & Gamon, The Great Australian Dream, GFC, Queensland Floods, Yasi

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