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RBA keeps rates on hold as property investor activity increases

By Rebecca Zhang

The Reserve Bank has predictably decided to again leave official interest rates on hold over June following the rate cut announced last month.

Official rates will remain at the new record low 1.75 per cent with the May rate cut following eleven months with rates on hold. This follows re-activated housing markets following lower mortgage rates since May, with auction clearance rates rising strongly in Sydney and auction market activity in other capitals also increasing.

Signs are emerging of increased residential investor activity reflecting possible changes to property taxes.

Latest economic data remains mixed with concerns continuing regarding the outlook for both the local and international economies.

Although the latest Australian Bureau of Statistics national GDP data for the March quarter was generally positive, indications remain of declining prices growth, which will likely remain a key concern for the bank.

The latest US jobs data was disappointing and decreases the chances of a near-term rise in US interest rates that would have put downward pressure on the Australian dollar in line with policymaker’s objectives.

And while ABS building approvals improved over April, trends are mixed with continued strength in Melbourne houses and Sydney units but weakening activity in Sydney houses and Melbourne units.

The April unemployment rate remains at a three-year low, however most of the recent growth has been in part-time jobs with full-time employment falling.

Although rates are on hold this month, the likelihood remains that the Bank will again cut rates in the near-term with growing concerns over declining inflation.

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