RBA On Hold Until 2020
Reserve Bank board members have indicated they are The Reserve Bank won’t lift the official interest rate until 2020, according to AMP Capital chief economist Shane Oliver. This follows this week’s decision by the RBA board to hold the cash rate at its current record low of 1.5%, in a move predicted by most industry pundits. None of the surveyed respondents on finder.com.au’s panel of industry experts predicted a rate change, while over 95% of brokers surveyed by HashChing expected to see a hold.
The decision to stay at 1.5% sees the cash rate being held for a record 21 meetings in a row. Members of the finder.com.au panel overwhelmingly stated that the conditions are not in place yet to see a rate change. Nerida Conisbee from REA Group says that while businesses are confident in the current economy, consumers are not. "Until this turns around, I think it is unlikely we will see an interest rate rise," Ms Conisbee says.
Oliver says a brightening outlook for mining investment, strengthening non-mining investment, booming infrastructure spending and strong export growth are likely to be offset by lower dwelling investment and constrained consumer spending.
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Approvals Down But Resilient
Approvals for new houses remain strong, although dwelling approvals overall have declined in 2018.
HIA’s principal economist Tim Reardon says new dwelling approvals overall peaked in late 2017 and have cooled modestly in 2018, particularly for apartments. "This modest reduction in approvals is consistent with other data showing that the housing market is cooling from a record high volume," he says.
The home-building market has cooled because of a slowdown in inward migration since July 2017 and constraints on investor finance imposed by state and federal governments. "Irrespective of these negative influences, the volume of approvals of new detached houses remains the strongest overall conditions we have seen in 15 years," he says. "The detached house building market remains resilient and the volume of house approvals during the three months to May was 3.1% higher than a year ago."
Stamp Duty Doubles In 8 years
A new report has highlighted that Australians are paying more on stamp duty now than ever before, as well as just how reliant state governments are on stamp duty. The Housing Industry Association (HIA)’s Stamp Duty Watch report reveals that Australian property buyers spent $21.3 billion in stamp duty to state governments in FY2018, which is an all-time high for the tax. "The report shows that revenue from stamp duty across the states and territories has doubled over the past eight years. This has added considerably to the cost of buying a home and represents a real setback for affordability," says Shane Garret, senior economist at the HIA. State governments are making as much use of stamp duty as possible, as it accounts for 26.2% of total taxation revenue. "State governments are more dependent on stamp duty than at any time in the last decade," Garrett says. "Stamp duty is notoriously unstable and Australia’s largest states are heavily exposed to any downturn in duty receipts should economic conditions change."
Quote of the Week
"We expect the trend – of slowing building approvals – to be modest throughout 2018 as employment and economic growth remain solid."
HIA’s principal economist Tim Reardon, who notes that apartment approvals have fallen but house approvals remain strong.
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