February Interest Rate and Australian Economy

At its meeting today, the Board decided to leave the cash rate unchanged at 3.0 per cent.

They normally carefully select other countries property markets to support their claims.

They then selectively chose the aspects of that economy or property market that supports their argument, conveniently ignoring all the other factors which make that environment completely different to the one in Australia.

Each country has its own unique conditions which greatly effect the operation and safety of their property markets.

The high risk junk loans that caused the initial problems in America don’t exist in the Australian housing market.

Housing loans with a high loan to value ratio (LVR) require mortgage insurance in Australia and no insurer will insure high risk loans.

Our banks are also required to have a balanced lending portfolio thereby reducing the risk and exposure to any one segment of the market.

So what happened to cause the downturn in not only the property market, but the entire Australian Economy?

What happens in America does have a profound effect on the rest of the world, either directly, or through the fear of a flow on effect.

A lack of consumer confidence however has been the biggest contributor to maintaining this downturn here. Politicians and other publicity seekers are largely to blame, with some still spruiking the collapse of the Australian Housing Market.

People are now saving more and spending less. This lack of spending has led to the closure of a number of businesses .This lack of confidence then became self- fulfilling.

There are some small signs of a turn around in the economy but most experts are predicting a slow rate of growth for 2013.

What does that mean for the Property Market?

Well the first thing it means is that we have reached the bottom of the market. That has been apparent for some time. In most areas there has been little movement in property prices.

Savings levels are extremely high at present meaning that a lot of people have a substantial amount of spare cash available.

When confidence returns to the market those people will be looking to invest that money, and the property market, which has again proven safe, will be a prime area for investment.

Whilst no one can predict the future, this year is looking far more positive for investing in the property market than previous years.