There is not much evidence that the cut in October spurred much housing market interest, with more recent stats on confidence and auction clearances suggesting the same for the December rate cut. The big question is whether this is enough to spur additional rate cuts in the near future. Certainly the last communique from the RBA suggests they are non-committal on further action in the very near future. Although most commentators feel otherwise, with forecasters looking for a further 50-75bps of cuts this year. This would take the level of mortgage rates down to levels seen in 2009.
To me it seems that the RBA will be less forthcoming than this and is definitely in no hurry to get to these kinds of levels. This has been the most subdued rate cutting cycle in recent memory and perhaps there is more to be gleamed from looking at periods when the RBA have slowly hiked rates than when they have aggressively cut.
In particular, the long tightening cycle from 2002 to 2009 saw the RBA wait for long periods before making small adjustments. Furthermore there was much debate about whether monetary policy could slow the economy down.
Slowly but surely rates did get to a level which had a big impact on activity, but the RBA was in no rush to get there. Perhaps there are more parallels today with that strategy than more recent easing cycles.
In particular, the long tightening cycle from 2002 to 2009 saw the RBA wait for long periods before making small adjustments. Furthermore there was much debate about whether monetary policy could slow the economy down.
Slowly but surely rates did get to a level which had a big impact on activity, but the RBA was in no rush to get there. Perhaps there are more parallels today with that strategy than more recent easing cycles.
