But according to Market Economics managing director Stephen Koukoulas, it is the global economy that maybe the biggest determining factor in any rate movement.
Koukoulas expressed worry over the world economy and factors such as commodity prices. He’s not anticipating another financial crisis, but observes that growth is very sluggish.
If rates vary in 2015, Koukoulas expects a downward movement.
He says, “If unemployment is up at 6.5%, the property market comes off the boil and commodity prices are still not strong enough, the next move for rates is down.”
Two other factors that may play a big role in the rate movement in 2015 are wage growth and consumer confidence.
An increase of just 1.5% annually for the next three years for Defence Force personnel is being considered by the Federal Government. According to Koukoulas, such low offer impacts the wider national economy.
He says, “There’s a link between public sector wages and private sector wages.” What this means is that a very low private sector wages growth lowers inflation and hurts consumer’s buying power.
Australia’s annual rate of inflation decreased from 3% in the June quarter to 2.3% in the September quarter, causing the Housing Industry Association (HIA) to reiterate its contention that rates will remain unchanged for some time.
According to HIA senior economist Shane Garrett, the present key measures of key inflation meet the Reserve Bank of Australia’s target range.
He states that “While today’s figures show a rather large reduction in the pace of inflation, this has been assisted by the one-off influence of the carbon tax repeal.”
Look at the housing component of the Consumer Price Index to see the effect of the carbon tax on households. Electric rates declined 4.4% in the September 2014 quarter and by 5.1% over the year.
Moderate increase of only 1.1% has been seen in the value of new homes in the September quarter, which is a glaring contrast to the significant price increase of established homes.
Garrett suggests that policy makers must tackle the steep price of bringing residential land to market if the country is to make significant headway into the housing affordability issue.