RBA cash rate decision - April 2014

As widely predicted, the RBA has announced it will be keeping the cash rate on hold at 2.5 per cent.

“The latest housing market statistics are likely to have caused the Reserve Bank some additional deliberation at their latest board meeting,” said RP Data’s head of research Tim Lawless.

The amount of investment in the housing market would be causing them concern, Mr Lawless said.

He added that while the headline growth rate is very high, it is Australia’s two largest cities, Sydney and Melbourne, that are responsible for driving such high capital gains.

“Clearly the rate of value appreciation across the Australian housing market has been unsustainably strong over the short term,” Mr Lawless said.

“However, the national economy is seeing a great deal of benefit from the increased level of both developer and buyer confidence which the RBA is likely to see as a positive outcome from the currently exuberant housing market conditions.”

“If value growth continues along the current trajectory though, I think the Reserve Bank will be forced to take action to quell the level of exuberance via higher interest rates.”