One industry pundit has said that the economy needs “significant improvement” before the Reserve Bank decides to raise the cash rate.
A recent Reserve Bank survey of economists and industry figures found that all respondents forecast a rate rise next year, with many betting on a gradual rate rises for the next three years, until it reaches a “new normal” of about 4%.
However, John Kolenda, managing director of 1300HomeLoan said it may be some time before we see the cash rate hit a new normal.
“There are some economists forecasting the cash rate to head north to 4% within the next few years, but we would need to see some significant improvement in the economy before the RBA returns the official rate to that sort of level.”
Despite concerns over rising house prices, Kolenda said if the RBA prematurely lifts the cash rate it may have a detrimental impact on the economy.
“It would be a serious mistake by the RBA to lift rates in response to house price rises, which are mainly occurring in the Sydney/Melbourne property market. There are already early signs of prices easing in those markets,” he said.
Regardless of how the property market performs, rate hikes may not be the preferred course of the RBA, according to ME Bank general manager of markets John Caelli.
“The RBA has flagged that measures other than interest rates may be more appropriate to address the issue of house prices," Caelli said.
Caelli agreed that the RBA would most likely leave rates untouched for the forseeable future.
“The RBA minutes continue to refer to a period of stability in interest rates and so we expect any rises in rates won’t occur until the first half of 2015.”
Kolenda warned that any rise before then could scuttle consumer confidence.
“Creating a more confident consumer climate required numerous rate decreases over the past few years and pulling the trigger too early could have disastrous consequences,” he said.
This is going to be it - when they raise rates it will be the beginning of the great transmutation. Investors and speculators will be left exposed and trying to offload overpriced dog boxes to a market that simply doesn't exist anymore, because all the First Home Buyers have called the market for what it is - an over priced con job ponzi scheme!!
This is going to be it - when they raise rates it will be the beginning of the great transmutation. Investors and speculators will be left exposed and trying to offload overpriced dog boxes to a market that simply doesn't exist anymore, because all the First Home Buyers have called the market for what it is - an over priced con job ponzi scheme!!
Lolz all round!
Yeah right sure - this is what happens every time the RBA raises interest rates.
Where do you get this stuff? Do you seriously still believe this nonsense?
Most of all how on earth can you believe that the RBA will do anything, anything at all, which would cause the property market to collapse?
If you can learn from history have a look at what happens to economies when the construction sector grows after a period of stagnation. Then you will see the kind of transmutation that is on the cards. Believe me it wont be renters sitting around laughing at home purchasers. The renters will be too busy working second jobs to stay in the locations they want to live in.
Whether this is good or bad or whatever is another debate. I am just giving you the heads up on the liars, with their own political agendas, who would tell you that the RBA will raise rates and property will crash.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Yeah right sure - this is what happens every time the RBA raises interest rates.
Where do you get this stuff? Do you seriously still believe this nonsense?
Most of all how on earth can you believe that the RBA will do anything, anything at all, which would cause the property market to collapse?
If you can learn from history have a look at what happens to economies when the construction sector grows after a period of stagnation. Then you will see the kind of transmutation that is on the cards. Believe me it wont be renters sitting around laughing at home purchasers. The renters will be too busy working second jobs to stay in the locations they want to live in.
Whether this is good or bad or whatever is another debate. I am just giving you the heads up on the liars, with their own political agendas, who would tell you that the RBA will raise rates and property will crash.
Interest rates haven't been this low for 50 years.
They have never stayed this low for so long ( almost 2 years now)
Money has never been cheaper and yet Perth is slipping.
what does that tell you?
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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