Interest rate cuts are the perennial good news / bad news story.
Good news for home buyers and another momentum-builder after other positive policy events of the last fortnight (no negative gearing changes, revised APRA controls and targeted help for first home buyers).
But, bad news because of what it says about the weakness of the economy.
The national accounts data out today will shed further light on the economy, but it’s clear that the RBA is becoming increasingly concerned about the strong economic headwinds we’re facing.
Yesterday’s cut to the official cash rate is a salutary reminder of the importance of good policy leadership from governments (federal, state and local) to drive confidence and investment.
It is particularly important that governments focus on the policy drivers for our industry. Firstly, because property is such an important part of the economy – making up 13 per cent of Australia’s GDP and employing more people than mining and manufacturing combined.
And secondly, because residential construction – one of the big engines of the economy – is winding down.
These issues will be front and centre as we engage with the federal government’s new economic team and with the federal Opposition as they undertake their post-election policy review.
It is also a cautionary tale for state governments as they move through their budget season, although one that the Victorian government evidently did not see coming as it lifted a raft of taxes last week.