The decision by the Reserve Bank of Australia to cut the cash rate by 25 basis points to 3.50 per cent today is justified given the ongoing economic uncertainty overseas, according to the Real Estate Institute of Queensland (REIQ).
The rate reduction was also necessary given that recent Australian economic data shows the construction and retail sectors in particular continuing to experience weak conditions.
Australian Bureau of Statistics (ABS) building approvals show that the number of dwellings approved fell 8.7 per cent and retail turnover fell 0.2 per cent in April.
“While we welcome today’s rate cut, further relief is needed for confidence to be fully restored across all segments of the Australian economy,” REIQ CEO Anton Kardash said.
“The real estate sector has known for quite some time that interest rates were higher than was necessary and this is starting to be reflected in the succession of weak data that is being reported.”
Yesterday’s share market losses, on the back of weaker than expected data out of the US and Europe, no doubt also gave the Reserve more reason to reduce the cash rate, Mr Kardash said.
“While the Reserve doesn’t tend to act on temporary economic events, the European debt issues continue to overshadow any slight improvements in global economic conditions and this does impact our economy, which is actually in very robust shape by comparison,” he said.
“This rate reduction, if passed on in full by lenders, is another vital step in restoring confidence to our economy, which is the envy of our compatriots overseas.”
– REIQ CEO Anton Kardash http://institute.reiq.com/REIQ/Media/2012Releases/Rate_cut_justified.aspx