RBA should cut interest rates today
Latest figures from the ABS (Australian Bureau of Statistics) show that building approvals fell by 7.8% in February, seasonally adjusted, following a rise of 1.1% in January, further placing pressure on the RBA to cut interest rates at today’s RBA board meeting.
With median property prices on the decline across all states and approvals for private sector housing down by 3.4% in February and a 15.8% drop in approvals for other dwellings, such as units and apartments, we can only hope that the interest rates will receive another cut soon.
Whether at today’s or at the May 1st meeting, the RBA will have to cut the interest rate to reinvigorate the market and make up for the slump we have seen since the last cut. While I can understand the RBA’s caution over the past two months, especially in view of the European financial climate, it has become obvious that further cuts should have taken place.
In order to strengthen the real estate market, boost new dwelling construction to meet the housing shortage and encourage market activity especially from first home buyers, an interest rate cut is a ‘must have’.
If we really wanted to invigorate the real estate market, perhaps, easing of planning costs and delays, an amendment of capital allowance provisions to enable accelerated depreciation of new rental dwellings and a national reduction of stamp duty obligations for first time buyers would be steps worth considering.
Cutting the interest rate, reducing the cost base of new housing, increasing housing supply, and boosting affordability are not only worthy aims, they are essential to a more productive economy. Housing is shelter and a necessity of life, and we should make curbing its shortage a high priority when making budgetary and legislative decisions.
Robert Projeski is a respected property finance expert and the managing director of Australian Mortgage Options, an independent mortgage management firm with over nine industry awards to its name.
