All Topics / Finance / RBA Cut again prior to Xmas

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  • Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    At its meeting today, the Board decided to lower the cash rate to 4.25 per cent, effective 7 December 2011.

    Growth in the global economy has moderated this year after a strong performance in 2010. Some of the slowing reflected temporary factors, and as these passed, the pace of expansion in the United States and much of Asia began to pick up around mid year. China's growth has been slowing, as policymakers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.

    The sovereign credit and banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on economic activity there over the period ahead. Financial markets have experienced considerable turbulence, and financing conditions have become much more difficult, especially in Europe. This, together with precautionary behaviour by firms and households, means that the likelihood of a further material slowing in global growth has increased. Commodity prices have reflected this, declining further over recent months and taking pressure off CPI inflation rates. This has increased the scope for some easing in monetary policy in a number of countries.

    Information about the Australian economy suggests output growth has been close to trend, with demand growth stronger than that. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, changed behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little since mid year, though it remains close to 5 per cent.

    CPI inflation on a year-ended basis remained above the target at the latest reading, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.

    The reduction in the cash rate as a result of the Board's previous decision flowed through to lending rates, which are now around their average level of the past 15 years. Short-term market interest rates have tended to decline a little further in recent weeks, though term funding conditions for financial institutions have become more difficult. Credit growth remains subdued and asset prices have declined further over recent months. The exchange rate has been quite variable over the past few months, but remains at an historically high level.

    Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.

    Cheers

    Yours in Finance


    Enquiries:

    Richard Taylor | Australia's leading private lender

    Profile photo of JT7JT7
    Member
    @jt7
    Join Date: 2010
    Post Count: 286

    Happy Days Richard!

    It was well worth us holding out those extra couple of days before considering those mid term fixed rates!

    Jack :)

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Jack
    Did you get my email from last night about the revised rates?

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of JT7JT7
    Member
    @jt7
    Join Date: 2010
    Post Count: 286

    Hi Richard,

    Just emailed you mate. Off work today so on hotmail address.

    talk soon,

    Jack

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Ok will read and report back.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Andrew_AAndrew_A
    Participant
    @andrew_a
    Join Date: 2003
    Post Count: 392

    Well if Brisbane can avoid the January we had this year there could be even be some renewed motivation for buyers in our market in 2012. That would make a nice present to place under the Christmas tree!

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Andrew agree although must admit November and December has been our busiest for 5 years with record numbers of Contracts arriving on my desk for both Brisbane and inter state.

    Either investors not too concerned about rates or better than me at predicting the falls.

    All we need now is lenders to actually pass on the reductions and that will be a feat in its own right.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Andrew_AAndrew_A
    Participant
    @andrew_a
    Join Date: 2003
    Post Count: 392
    Qlds007 wrote:
    Andrew agree although must admit November and December has been our busiest for 5 years with record numbers of Contracts arriving on my desk for both Brisbane and inter state.

    Either investors not too concerned about rates or better than me at predicting the falls.

    All we need now is lenders to actually pass on the reductions and that will be a feat in its own right.

    Cheers

    Yours in Finance

    That's really encouraging to hear, the key with most parts of the industry is turnover rather than what happens to price, though price and turnover tend to be correlated! I'm yet to see anything concrete with sale prices though that can take a couple of months to become clear.

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