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James Mitchell
An interest rate cut will not solve Australia’s affordability crisis, one industry figure has claimed.
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Speaking to The Adviser, AMP chief economist Shane Oliver said a rate cut would only create another “temporary blip” in the market.
“I think that would probably turn out to be another temporary blip, like we saw with that huge surge in prices through 09 into early 2010,” he said.
“So I think a cut in interest rates, particularly if it’s the 100 basis points that Westpac’s been talking about would probably put the life back into the housing market and turn price declines into price rises, which in the fundamental sense I don’t think does anything to improve the lack of affordability in the Australian housing market.
“It would probably give you another surge in prices but it would be in a range which is relatively constrained, I think.”
Mr Oliver said while any future rate cut would be driven by poor consumer sentiment, more economic data would be needed before a decision is made.
