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Where is the cash rate heading?

By Ben Faulks

If you've been on the hunt for Belconnen apartments or houses, home loans should remain affordable for the time being.

In October 6, the Reserve Bank of Australia (RBA) decided to keep the cash rate at its record low of two per cent. This is the fifth month in a row it has remained unchanged, with many experts predicting this to endure for at least another year.

CommSec sheds some insight into why this may be. The main objective of the low cash rate  are to stimulate economic growth. Until these ends have been met to a satisfactory level, there is almost no chance of a hike.

As RBA Governor Glenn Stevens himself said, "Overall, the economy is likely to be operating with a degree of spare capacity for some time yet… In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending."

Boosting consumption and spending is the target here. But has it had the intended effects?

According to CommSec, yes, for the most part. Car sales and building approvals have both record highs, no doubt thanks to the increase in borrowing and spending. Furthermore, employment and job listings have both seen a significant lift as commerce begins to flow more rapidly. All these indicate that growth is indeed being stirred in the economy, and should continue to do so, as long as the cash rate remains low.

Still, "growth rates are below 'normal'", as noted by CommSec. There is no saying when this will truly turn around.

House hunting in Belconnen

With home loans staying affordable thanks to record low interest rates, there's never been a better time to look at Belconnen real estate. Get in touch with Ray White Belconnen and we'll make sure you get the best home for your needs.

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