As the share market busily signals an economic upswing next year and house prices rise across the nation, the big question is, are we finally at the bottom of the rate cycle?
While three rate cuts this year have failed to move the dial on unemployment, wage growth and retail sales it has put a rocket under house prices again on the east coast. It has even had a positive impact on the WA property market.
The Reserve Bank’s Next Move?
So, the Reserve Bank now finds itself in a delicate position. On the one hand, needing to further stimulate consumer and business confidence while on the other hand not wanting to create another property boom.
On balance, we think there may still be another rate cut early next year. This would take official interest rates down from 0.75% to 0.50%.
If rates, however, do start edging up, then don’t be alarmed. Why? Because rates are at historically low levels and therefore, just as recent downward moves have not stimulated demand, we think any negativity about an upward move will generally be swamped by the existence of robust economic indicators.
The Silver Lining...
If rates do increase you will likely be the beneficiary of the generally improved economic conditions that would prompt such a move. This could be in the form of an increase in income or a nice upward tick in the value of your real estate assets.
Every cloud has a silver lining.