November Interest Rate and Australian Economy

The Reserve Bank of Australia has decided that Australian economy needs help and have lowered the cash rate to 3.25%. 

“The Asian story and its implications for us are well known. The strong growth in the region has led to a marked increase in the prices of resources and agricultural commodities, relative to the price of manufactured goods. This has been to our considerable advantage, given our natural resource base and our stable investment climate. It has meant that at a time when many of the advanced economies have been experiencing what is close to an investment drought, Australia has had the highest level of investment, relative to GDP, in over a century, and a further increase is expected.” (Phillip Lowe Deputy Governor RBA) 

 What does this mean for the Property Market? There has been a boom in property prices in the mining areas. Growth will continue in those areas, however at a much more subdued pace and at a more realistic pricing level. Some of these rural towns will grow to become major regional centres with self-sustaining economies that will continue well past the life of the mines. 

There has been a drop in new home construction in Australia to the lowest level in fifteen years. Some of this is due to more young adults choosing to stay at home with their parents than in previous years. This is in part due to the belief that our property values are going to fall as they have in America.