By JOLENE OGLE
GET out and invest, that’s the advice from Federal Treasurer Joe Hockey following the Reserve Bank’s decision to cut rates to just two per cent.
In a press conference yesterday, Mr Hockey said the rate cut was good news for families and small business and would stimulate economic growth and help create more jobs.
“Now is the time to borrow and invest, whether you are a household or a small business, now is the time to have a go and invest,” he said. “Invest in the things that help create jobs.”
The 0.25 per cent cut takes lending rates to the lowest point since at least the late 1950s, but is not expected to drop further in the coming months.
Housing Industry Australia (HIA) economist Geordan Murray said the drop in the cash rate was in line with market expectations.
“In the lead-up to (yesterday’s) meeting there had been a strong view that a rate cut would occur at some point in the near future, a position strongly endorsed by HIA,” he said.
“While the aggregate level of new home building activity is at record levels, the strong conditions have not been experienced universally across the industry.
“Conditions in the home renovations market remain subdued and many regions outside of the major eastern seaboard capital cities have not seen the uplift in new home building.”
Mr Murray said the low interest rate environment has played a role in boosting industry activity and yesterday’s rate cut would offer the support needed to reignite business investment more broadly.
But there are fears for first home buyers who could be pushed out of the market due to a property bubble.
Commentators are concerned lower interest rates will only “add fuel to the fire” that is seeing the median price for a house in Sydney rocket to $1 million, with similar trends in Melbourne and major cities throughout Australia.
“For many young first-home aspirants, the Australian dream of owning your own home is becoming increasingly that – a dream,” writes The Drum reporter, Sheryle Bagwell.
