Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

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Tuesday, 19 June 2012

Interest rates seem likely to stay put in July

So it seems, anyway. The Reserve Bank's Minutes from its June meeting released today state that it was a finely balanced decision to cut the cash rate by 0.25% on June 5.

And then the next morning at 11.30am the Australian National Accounts from the ABS showed that Australian GDP was actually cruising along at 4.3% in the year to March 2012.


To me, it does call into question the wisdom of having such rigid dates for Reserve Bank meetings.

Surely the Board would have loved to know the GDP result before making its decision (and surely they would have left rates on hold too)?

In fact, take a close look at the wording they used: they "did not have time to assess the effects of earlier reductions in the cash rate".

Waithing another 24 hours wouldn't have hurt.

The Board considered whether the recent information warranted a further reduction in the cash rate.

The arguments were finely balanced. Recent domestic data generally had not suggested a significant weakening in conditions compared with the forecasts a month earlier. Moreover, there had not been time to assess the effects of the earlier reductions in the cash rate. However, there was clear evidence suggesting a softening in global conditions, and uncertainty about the future in Europe had increased significantly. While spillovers had been limited thus far, there was a reasonable likelihood that the tendency toward precautionary behaviour both abroad and at home would intensify.

Given this, and with inflation expected to remain in the lower part of the targeting range over the next year or so, members considered that there was scope for monetary policy to be a little more supportive of domestic activity. Members judged that a reduction in the cash rate of 25 basis points, combined with the earlier reductions, would mean that monetary policy would be providing a measure of stimulus that would be expected to flow through to the domestic economy over the coming months.