The Reserve Bank may have left the cash rate on hold for another month, but there appears to be a gradual change in language and some commentators see a rate cut for November

by Glenn Baker

The Reserve Bank maintained a stable interest rate environment when it left the official cash rate unchanged at 4.75 per cent per annum following its July Board meeting, with no change made since November last year.

For some time now expectations have been built up for the resumption of policy tightening in the second half of 2011. Predictions mainly focused on a lift of 0.25 per cent per annum in August, immediately following the release of the June quarter inflation data in late July, with one additional increase of the same size before the end of the year. With August now almost here there are signs emerging that the policy pause may be extended. The shift in thinking is being driven by both global and domestic factors.

by Troy McErvale

I have been hearing self-appointed experts say for a couple of years now that there is a housing bubble, and that property values are going to fall from the sky. We are all doomed, and everybody should sell their property now, or risk facing massive losses.

If you say something for long enough, eventually, that fact will become true. However over a period of a year or more, then these “experts” should admit they got it wrong, and the media should pay scant attention to them.

Of course that won’t happen. Headlines like “Housing prices to remains stable” won’t sell newspapers now will they?

The fact is that housing prices (let’s take Melbourne for example), will not drop appreciably. And there is a simple, basic reason underwriting that. Supply and demand.

by Glenn Baker

The Reserve Bank Board again opted for stable interest rates when it left the official cash rate unchanged at 4.75 per cent at its April meeting. This is the fourth meeting in a row at which it has maintained a steady cash rate.

The immediate outlook for interest rates is for a continuation of a 'no change' approach by the Reserve Bank. As we move deeper into 2011, however, it is expected that developments in the economy will necessitate a return to a mild tightening of monetary policy that would see interest rates raised again in the latter part of the year in order to contain the emergence of a higher level of inflation.