Reserve surprises market with steady rates

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The Reserve Bank surprised nearly everyone – including me – this afternoon by keeping the cash rate steady at 4.25 per cent.

The monthly announcement of the RBA’s decision has become a hotly debated topic over the past few years and there are even live crosses about the announcement on our free-to-air TV channels.

Before I owned my own home, and indeed before I started working at the REIQ more than five years ago, I don’t think I ever gave interest rates much pause for thought at all. But then again media coverage was not as instantaneous then nor were interest rates so, well, “interesting” or newsworthy to media outlets.

Now, it is nigh on impossible to not read or hear or watch analysis on what the RBA may do or may not do come the first Tuesday of every month. There are even thousands of column centimetres – such as this one – devoted to when the Reserve does nothing at all, which you have to admit is kind of weird.

Over the last week, there has been much rhetoric from lenders about their supposed “inability” to pass on a rate cut – if there had been one today – because of increased funding costs from overseas. Never mind that one lender just announced a $1.4 billion profit for the December quarter . Indeed, the gap between the cash rate and standard variable rate charged by lenders has blown out to 3.05 percentage points – the highest since 1994. Between 1998 and 2007 the average was 1.8 percentage points.

REIQ accredited agencies have been reporting small increases in activity since about November and confidence levels amongst buyers and sellers had also starting to improve. Let’s hope that positivity continues even after today’s announcement.

The big question is: Did the Reserve make the right decision today?

 

Nicola McDougall, Media & Communications Manager and REIQ Journal Managing Editor