Chris Caton: why a stay on interest rates adds up

The RBA has been a reluctant cutter for some time, with the view a record-low cash rate should suffice. But, of course, borrowers don’t borrow at the cash rate. Recent moves by the major 4 banks could mean that the “retail rate” is now higher than the RBA would like, in which case the probability of a rate cut increases. On the other hand, the RBA may be quite happy to have some of the (localised) heat taken out of the property market. While it is true that auction clearance rates have fallen, they remain above the level usually associated with significant price weakness (that said, feel sorry for the denizens of Perth, where house prices are down by more than 6% from early in the year). Note falling growth in investor credit is not an indicator of a slowing market. It is no coincidence that the growth of credit to owner-occupiers has accelerated in the past two months, to the highest rates since early 2010. How are these two related? Find out from BTFG's Chief Economist here (VIEW LINK)