Welcome to this month’s Dominion Finance newsletter.
As we kick off the new financial year, the “will they” or “wont they” speculation of the Reserve Bank’s decision on interest rates is still with us. Everyone seems to have a bet each way whether it was going to be today or not, and certainly at least one more in the future.
On the news recently, they were talking to people on the street to gauge their opinion on whether interest rates will go up or not and the impact that it is having on them. More than one person lamented that “everything is going up” and the Reserve Bank should stop putting up the cash rate so prices could come back down again. Fortunately, none of these people work at the Reserve Bank with their limited understanding of economics.
According to the latest data from the Australian Bureau of Statistics (ABS), inflation has shown some moderation, declining to 5.6 percent in May from 6.9 percent in April. However, it still remains above the Reserve Bank’s target range of 2-3 percent, despite recent increases in the cash rate.
Despite the challenges posed by inflation and housing costs, recent data from the ABS reveals an unexpected increase in retail sales in May 2023, surpassing economists’ expectations. This surge in spending was driven primarily by growth in sectors such as retailing, recreational goods, pharmaceutical and cosmetics, and other specialty retailers. Additionally, there was a rise in spending on dining out, indicating a renewed interest in enjoying dining experiences.
Furthermore, NAB’s Online Retail Sales Index for May 2023 showed growth in most categories, with a strong rebound in homewares and appliances, fashion, and department stores.
Until we all feel the pinch of rising prices and close our wallets on discretionary spending in particular, interest rates may continue to rise in the future.
Along with rising retail prices, we are also experiencing a rise in house prices in most capital cities and regions, except for Hobart. With a rebound in the housing market, mainly due to high demand with a surge in migration, and with limited stock of houses for sale, along with increases in weekly rents, more and more investors are returning to the market. There is expected to be the normal annual increased activity in Spring as more sellers list their houses for sale, and more buyers look to enter the market, therefore during the winter months might be a good time to purchase a home or an investment, before the prices rise higher.
Dominion Finance brokers are continuing to reach out to all our clients who are coming off fixed rates and we will have the discussion on refinancing opportunities.
Until next month.
At its meeting today, the Board decided to leave the cash rate target unchanged at 4.10 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.00 per cent.
Interest rates have been increased by 4 percentage points since May last year. The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so. In light of this and the uncertainty surrounding the economic outlook, the Board decided to hold interest rates steady this month. This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook.
The information provided in this newsletter is general in nature and does not take into account your personal circumstances, needs, objectives or financial situation. This information does not constitute financial advice. Before acting on any information in this newsletter, you should consider its appropriateness in relation to your personal situation.