Rates set to stay on hold: RBA minutes

The Reserve Bank expects a sustained period of low interest rates due in part to subdued labour and product markets, its August meeting minutes reveal.

The RBA expects inflation will remain within its 2-3 per cent target range over the next two years despite recent higher readings. GDP growth was likely to have slowed in the June quarter and expected to be below trend over 2014/15; wage growth is likely to remain subdued.

The RBA left the cash rate unchanged at 2.5 per cent at its August 5 meeting; the meeting minutes were released this morning.

“The Board judged that monetary policy was appropriately configured and that, on present indications, the most prudent course was likely to be a period of stability in interest rates,” the minutes state.

The RBA also noted conditions in the established housing market remained strong. While house-price inflation nationwide had not been as rapid this year as during the second half of 2013, it had remained robust.

Average lending rates on housing loans continued to edge down over July, mainly due to the ongoing replacement of more expensive fixed-rate and discount variable-rate loans from previous years.

“Overall, cumulative movements in interest rates since the start of the year amounted to a noticeable easing in financial conditions,” the minutes state. “Financial markets continued to expect the Bank to leave the cash rate target unchanged … over the year ahead.”

Portfolio Management Services’ Director Acquisitions Grant Edmunds said the RBA’s outlook was positive for property investors. Along with banks dropping fixed mortgage rates below 5 per cent, it gave investors cause for confidence.

“The economy is just doing OK. Manufacturing is fragile, wages and inflation are under control and it will be some time before unemployment falls considerably,” he said.

Mr Edmunds said with returns on bonds and deposits not great from an investor’s point of view, some would look to property. There were also refinancing opportunities for Sydney property investors on the back of the strong Sydney market.

“It is a good time to buy in if the property is bought well,” he said. “We know for instance Brisbane is racing ahead – prices are recovering and there’s a correction underway. Interest rates are low and you get all the tax benefits. It all goes to serviceability.”

Opportunities in the Brisbane market will be the subject of Portfolio Managements Services’ free inaugural market update conference call next month. To book you place or for obligation-free expert advice on your property investment ambitions, speak to our acquisitions experts today on (03) 9621 1044.