This was a widely expected move, according to REA Group Chief Economist Nerida Conisbee.
What was unexpected for the Australian economy was the improving Australian dollar. As interest rates in the US began tightening, a decline in the Australian dollar was anticipated. However, commodity prices started to increase in February and uncertainty influenced the actions of central banks overseas.
The RBA seems to be wary as a result of mixed data on business and consumer confidence and the likelihood of an early federal election.
The Impact on the Housing Market
With interest rates continuing at present levels, it means borrowing costs for buyers will continue to be low as well.
Investment lending had weakened due to changes in APRA regulations in 2015. However, this is being partly counterbalanced by owner-tenant lending which continues to be on an uptrend.
Building approvals have declined 9% throughout Australia for the year, but stats are rising in Queensland, Tasmania and NSW. Building activity is growing with the number of homes rising to 10.9% over the last 12 months.
Growth in Housing Prices Weaken
The RBA move comes as the latest figures show house values dropping to the lowest levels in nearly three years thru the end of March 2016. The latest index is a significant change compared to the same period in 2015. Capital city dwelling values in the first quarter of 2015 increased by 3.0%, which is nearly double the present level of quarterly growth.
But in contrast to the last quarter of 2015, when capital city home prices dropped 1.4%, the housing market growth was on a moderate rebound. This is significantly below the robust capital growth posted in the first six months of 2015.
Combined capital city dwelling prices increased by only 0.2% for the month and 1.6% for the quarter, according to the CoreLogic RP Data Hedonic Home Value Index.
The most significant change was seen in Darwin, where home prices rose 2.1%. Next was Perth, which posted a 1.2% growth. However, the two capital cities are recording lower year-on-year numbers.
The biggest loser for the month was Brisbane, where prices fell 1.2%.
Melbourne is still outpacing Sydney in yearly growth, with prices increasing 9.8% year on year in contrast to a rise of 7.4% for Sydney.
Since July 2015, the housing market has been weakening, when home values in capital cities were rising at 11.1% annually.