Australian Property News

Door open for February interest rate cut

Posted on Wednesday, January 23 2013 at 3:05 PM

The release of today’s underlying inflation figure leaves the door open for the Reserve Bank of Australia (RBA) to cut interest rates in February, according to a leading economist.

JP Morgan chief economist Stephen Walters says the inflation rate or 2.4 per cent provides “accumulating evidence that domestic demand remains soggy”.

“Annual inflation tracking along the bottom half of the RBA’s two to three per cent target band provides officials with the ‘excuse’ to push the cash rate deeper into accommodative territory,” Walters says.

Matthew Gross, director of advisory firm National Property Research, isn’t convinced any further cuts will have an immediate impact on the property sector.

“I think our greater leads will come from watching what happens in retail spending,” Gross says. “I think we’ll see what happens with the new homes construction data and I think the stockmarket is a much better indicator.”

He believes the flow on effects of any rate reduction will take longer to filter down to property.

 “The interest rate fall will probably have a bigger impact on people’s capacity to spend. That’ll help stimulate the economy to create more confidence and then we will see that flow into the housing market.”