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Ben Kingsley Blog post by Ben Kingsley

RBA Rate Decision – September 2015

Hello Ben Kingsley here. Thanks for watching this RBA video announcement. As you can obviously pick up, I’m not in the office as I usually am at the moment. I’m currently on a family holiday up in tropical North Queensland.

What an interesting time to take a holiday. In fact the last time, as I was saying it to my wife, that I took a holiday like this was back when Lehman Brothers collapsed and I thought that was going to be the end of the financial market and it turns out to be a very significant global financial crisis. This time around last week we saw huge volatility in the world’s stock market and that is a concern. The reason why that is a concern is because it basically plays on sentiment and it plays on business and investment sentiment around the globe. So we saw at the end of the week, a real correction occurring again. That is giving us some confidence but I’d like to think that at the moment, that sort of confidence stays and we would see some stability in our equity market. Because if we don’t have that type of stability, we are going to be all sort of strive into the future. So RBA kept rates on hold. That is not a big news, we expected that to happen. In fact, Federal Reserve in America is probably going to keep interest rates on hold given the volatility of last week.

Now, what does it mean for the property market?

Well in general terms, there are two sides of the conversation. One might say there will be a flight to bricks and mortar as we saw in the ’87 crash. But that being said, this time around, things are being a little different. We have historically low interest rates, so I don’t see that big flight already occurring because the reality is, we’ve seen a lot of that movement in the market already in term of Sydney and Melbourne prices. I don’t expect to see a big run or a big movement to bricks and mortars this time around. I think it is important to note that because in reality we don’t want to see those type of movement. Already we’ve got enough people investing in property and any further stimulus or speculation in this market is going to be unsatisfactory and it is going to cause potential overvaluation of property and a reasonable correction as oppose to we’re probably at fair market value. I’ve been saying this for a few months now. I don’t like to see anymore market appreciation right across the board at the Syndey market and in terms of the Melbourne market, we are going to see a little more appreciation in the blue-chip suburbs with both domestic buyers and also some of the foreign buyers coming in and snapping up our new stock that is coming online now for the next couple of months leading into the spring and summer selling season. So it is an interesting time in the property market but not one that I would be too concern about at the moment. It does require a bit of constant watching but right now, I’m comfortable where the situation is.

In terms of the Australian economy, I don’t think we would see interest rates drop any further unless we do see a collapse in the equity market around the world. It’s really important to understand that when you’ve got an economy like we have at the moment which is growing OK, inflation well contained at 1.5% and general sentiment in terms of consumer spending and so forth being fairly good, I’m actually more optimistic than pessimistic about what is going to happen in the domestic economy for the coming 12 months. That being said, again, you get these global uncertainties and we all start to get a bit more conscious and cautious and that stops spending and that stops economic prosperity and economic activity and that is a concern for us. But right now, from the beautiful beaches of Port Douglas up here in tropical North Queensland, that is bye for now until next month’s RBA announcement.

 

(Those people watching/reading this should be reminded this is an opinion comment by Ben Kingsley, and should not be used when making decision about financial matters without seeking further clarification and understanding of your own personal circumstances. This article is not advice you should rely upon. I recommend you speak to one of our licensed professionals before taking any action with your financial affairs.)

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