Is the RBA knocking Australia into a recession?
Following the central bank’s shock decision to lift the cash rate at its May meeting, one financial expert has urged the Reserve Bank of Australia (RBA) to throw caution to the wind as recession threats loom large on the horizon.
As part of its hunt to wrangle inflation into its 2 per cent to 3 per cent target range, the RBA resumed its cash rate hiking cycle earlier this month, taking the rate to 3.85 per cent, but Shane Oliver, the head of investment strategy and chief economist at AMP, considered that taking similar monetary policy action in the future risks running the national economy into recession.
Noting the importance of driving inflation down, Mr Oliver revealed on a recent episode of Secrets of the Top 100 Agents his position had been that the RBA “should have paused for a little bit longer”.
While the RBA has their eyes across a number of metrics, including household spending, employment, and inflation, among others, it is the central bank’s laser focus on home values, which have risen for two consecutive months, according to CoreLogic, that intrigues Mr Oliver.
He described how the RBA wants lower house prices because it produces a “negative wealth effect that, as house prices fall [and] people feel poorer and they spend less”, which, in turn, achieves the same aim as getting lower spending and lower inflation.
But, the expert believes the RBA’s concern with rising house prices, which has been induced by a myriad of factors, including, but not exclusive to, rising immigration and a very tight property market, is “a little bit premature”, especially considering his position that “a couple of months don’t necessarily prove anything in terms of house prices”
Pointing out how Australia entered a similar interest rate rising cycle back in the late 1980s, which lead to a recession.
“That’s the problem here. If you don’t wait to see the impact of your rate hikes, then you’ll keep going and going and going, and then finally, you find you’ve gone too far.”
“And so, that’s why that risk of recession is there,” Mr Oliver concluded.
Budget 2023: What’s in it for housing?
The Albanese government has delivered its first full-year budget since winning last year’s election.
Describing secure, affordable housing as being “out of reach” for many Australians for too long, Federal Treasurer Jim Chalmers used his budget speech to further the Labor government’s commitments to support the national housing market.
Build-to-rent projects encouraged : BTR projects will see a boost, with the government pledging to accelerate tax deductions and reduce the managed investment trust withholding tax rate.
A boost to buying power (and increasing social and affordable housing supply) : The government has also revealed a number of new measures to increase social and affordable housing supports and “improve access for home buyers”.
Bolstered housing and homelessness supports : under the headline of National Housing and Homelessness Agreement Transitional Funding, the Labor government pledged an additional $67.5 million in the 2023–24 financial year to boost homelessness funding to states and territories.
Improvements to energy efficiency relief : the budget includes a $1 billion investment to help provide “low-cost loans for double-glazing, solar panels, and other improvements that will make homes easier — and cheaper — to keep cool in the summer and warm in the winter.”
Bricks + Agent
Ahead of the agency’s transition to Property Tree in the new financial year, we have now moved to a new online maintenance management system, Bricks+Agent.
The move to Bricks+Agent should assist with clear communication for all parties, including you as the owner, the property manager and the tenant.
The new platform will provide access for property managers to view a detailed log of expenditure and previous maintenance at each property, as well as the ability to set up recurring maintenance such as gutter cleaning & AC servicing.
It also provides benefits for tenants such as the ability to report maintenance via QR code and receive a self-help guide to resolve any minor maintenance requests prior to lodging.
Once the request is lodged, all parties are automatically updated throughout the maintenance process to ensure clear communication.
Thank you for your ongoing support!
Regards David, Benjamin & the Team at DB Philpott Real Estate