Talk around Town

The biggest discussion point over recent weeks has been the burning question, “Have we reached the bottom of the interest rate cycle or will the Reserve Bank cut interest rates one more time?”

The big banks have now dropped their five year fixed interest rate Home Loans to 4.9% p.a. and the standard variable home loan is now being advertised below 4.8% p.a. Given that Bank’s very rarely get their pricing models wrong in so much as they normally try to ‘win’ – a five year fixed term under 5% is significant.

So will the Reserve Bank look to have one more interest rate reduction this year?

I think it will depend on the unemployment figures, residential house pricing, new build starts and the inflation figures – look to the RBA’s November Melbourne Cup board meeting if there is to be a further reduction.

It comes in the same week (ending 1/8/2014) that the ANZ-Roy Morgan survey shows consumer confidence is at high levels not seen for the previous seven months, rebounding from the slump in April and May. (Read article below Consumers get their groove back)

Most States are seeing property prices continue to grow, albeit at low levels in the recent quarter but none the less demonstrating a year on year increase in housing prices.

So what does this all mean, it would appear that the overall economy is still ticking over quite nicely, despite the circus that we are seeing in Canberra with new policies being held up constantly in the new Senate. In other words, the people of this great country are getting on with business in spite of the Government of the day.

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