There are growing concerns over the performance of the national economy which was reflected by the Reserve Bank of Australia (RBA) cutting rates last month. This was after 16 consecutive months or rates being on hold.
This month saw the official rate on hold again at the record low 2.25 percent despite recent data predicting another cut.
The latest unemployment figures from the Australian Bureau of Statistics (ABS) reported a national rate of 6.4 percent over January (seasonally adjusted). This is the highest monthly rate for 12 years
The ABS wage index data also points to a sluggish economy with the 2.5 percent annual growth over 2014 the lowest recorded in the series.
Over 2014 a minimal 1.7 percent growth was recorded by ABS Consumer Price Index which confirmed Australia’s low growth, low inflation economy.
High budget deficits constrain policy makers’ capacity to stimulate economic growth leaving the heavy lifting to monetary policy.
Other recent data however has been more encouraging. Although capital city home building approvals fell over December, an overall increase inactivity of 15 percent was recorded over 2014.
Despite disappointing local economies, there are early signs that housing markets have commenced 2015 positively:
1) Sydney, Melbourne and Brisbane have had solid to strong Auction activity with the Sydney market remaining particularly robust.
2) Credit is recording moderate growth overall, with stronger growth in lending to investors in housing assets.
3) Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months.
The RBA is working with other regulators to assess and contain risks that may arise from the housing market.
The rising housing market activity following on from lower mortgage rates, may present the RBA with a dilemma of further rate cuts potentially fueling strong prices growth particularly in the Sydney market.
Although rates remain on hold over March the predictions of future action from the Bank clearly remains downwards. Much will depend as usual on measures of economic activity- particularly unemployment rates.