In some positive news concerning the economy, the Reserve Bank head of Economics Analysis department, Anthony Richards has said in an address to the Annual Housing Congress in Sydney, that the recent drops in interest rates are having a positive effect on the economy and the household sector.
Richards said that the lowering interest rates were making housing more affordable and allowing people to pay off their mortgages quicker.
Although home building is likely to remain weak, overall housing prices in Australia softened by 3 percent late last year.
He notes a direct correlation between lowering interest rates and housing affordability.
“In Australia, the cash rate has now been cut by 400 basis points since September 2008, and standard variable housing rates have fallen by 375 basis points.”
Banks are now in a healther shape, said Richards, so they have been able to “pass through the reductions in their funding costs.”
First home buyers are now flooding into the market, and undersupply will see the property market increase over the next few months, said Richards.
“First home buyer demand is also expanding following the boost to grants for these buyers. Another factor that should support home building over the medium term is that we are starting from a position of some undersupply in the housing market.”
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