Well there you have it – an election victory that none of the media experts or political pundits saw coming.
Let’s just keep our fingers crossed that stability now prevails over the coming 3 years and have a look at what has been happening in our markets over the past week since the election:
- Reserve Bank poised to cut interest rates in June
- Bank regulator APRA loosens home loan rules
- Share market surges on election results
Read on for further information!
Reserve Bank poised to cut interest rates in June
The Reserve Bank governor has given the strongest indication yet that interest rates will be cut in June.
In a lunchtime speech to economists in Brisbane this week, Philip Lowe said the RBA had decided at its last meeting that inflation would not rise back to the 2-3 per cent target unless unemployment fell.
Markets increased their bets on a rate cut from 61 to 72 per cent once the speech was publicly released, and the Australian dollar eased slightly from 69.11 to 68.9 US cents. The Australian share market also received a modest boost.
The likelihood of a rate cut sooner rather than later had already been highlighted in the RBA’s Statement on Monetary Policy earlier this month.
Bank regulator APRA loosens home loan rules
Australians will be able to get a bigger mortgage if Australia’s prudential regulator goes ahead with a plan to loosen requirements for banks to use a minimum 7 per cent interest rate when assessing borrowers’ ability to service loans.
The Australian Prudential Regulation Authority (APRA) has flagged lowering the minimum interest rate serviceability buffer from 7 per cent to a level determined by banks and other lenders.
The removal of the interest rate floor comes amid falling house prices, record-low credit growth, and expectations that the Reserve Bank will cut interest rates this year. The cash rate is currently at an all-time low of 1.5 per cent.
Share market surges on election results
The big four banks and private health insurers are surging, leading strong share market gains on the back of the Morrison Government’s predicted re-election.
The ASX 200 share index closed 1.7 per cent higher at 6,476 — its highest level since late-2007, when the global financial crisis was brewing, and just below its record high.
The market was driven higher by strong gains for the financial sector.
Analysts said the banks were gaining ground because some of Labor’s policies would have had the potential to dent their earnings, such as limiting negative gearing, reducing the capital gains tax discount, the possibility of higher bank levies and tougher restrictions on mortgage brokers than proposed by the Coalition.
So there you have it, a trifecta of good, stable news for our economy and property markets
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