The Housing Industry Association reports that the Reserve Bank Board has
voted to lower the Official Cash Rate for the first time since August 2013. The
Housing Industry Association (HIA) is the voice of Australia’s residential
building industry. RBA has taken this step to boost economic activity in the
HIA Chief Economist, Harley Dale explains that reasons such as Australia’s
inflation pulse being at its slowest in several years coupled with weak
domestic demand have led the RBA Board to cut rates to provide an opportunity
for the economy to grow at a stronger rate than might otherwise have occurred.
He noted that new residential construction has been the star performer
of the Australian economy in recent years, generating considerable employment
along the way; however, wider domestic consumption and investment have failed
to catch the ride.
According to Harley Dale, lowering the interest rates will help maintain
very healthy levels of new home building while hopefully broadening the base of
Australia’s economic growth. He added that the Reserve Bank has also indicated
the Australian dollar needs to fall further with another interest rate cut
helping to achieve that outcome.
The RBA has also hinted at a further elevation in the use of macro
prudential tools to restrict mortgage lending in a targeted manner. Harley Dale
concludes that care needs to be taken any such action will not adversely impact
confidence and activity in the broader residential market.