The Reserve Bank of Australia has taken an unprecedented step and cut the interest rates down to 1.25%. This comes on the back of a 0.25% decrease or 25 basis points cut from the previous record low of 1.5%.
This comes on the back of weak house prices & a low consumer price index. House prices where can be seen fluctuating on a downward trend by Corelogic show the prices in Sydney are down a considerable 11.5% for houses & 8.75% for units for the year to May 2018.
This represents an overall drop of 10.7% for the year to May 2018 for all dwellings overall which is the largest fall out of any major city over that period with falls closely followed by Melbourne then Perth. This represents a significant pullback in prices from a year ago .
Additionally, according to the RBA website, the consumer price index for all groups fell in the March 2019 quarter to 1.3% which is the lowest result in the last 2 years.
It should be noted that the unemployment has increased in April to go from 5% to 5.2% representing a 0.2% increase in the number of jobless people in Australia, as reported in a statement by the RBA on the interest rate cut.
In the same statement, it was also reported that the auction results in certain cities have been experiencing a rise in clearance rates as can be noted by the Sydney auction results which have been seen over the past few weeks.
Reducing the interest rates could make it cheaper for both consumers & developers to borrow, thus potentially providing a stimulates to the sector.
It would be interesting to see how it affects the construction sector as Building approvals have taken another fall in year from April 2018 to April 2019 where according to the Australian Beauru of Statistics, Building approvals are down by -21.8% overall with houses down -16.8% and other dwellings excluding houses (which includes apartments, townhouses, etc) was down -27.8%.