The Most Significant Interest Rate Decision of the Last Decade

On Tuesday 7th of May the Reserve Bank of Australia lowered their interest rates by 0.25 basis points when based on all the indicators and their own summary they should have been left on hold. Mark Bouris gave me some incredible insights as to why he believes history could show it as, “The most significant interest rate decision of the last decade”, here is why.

Interest RateI had the opportunity of seeing Mark Bouris give a speech to over 3000 entrepreneurs and business people at the National Achievers Congress in Perth last weekend. Known for his role as host of channel 9’s Celebrity Apprentice, founder of Wizard Home Loans and Yellow Brick Road, no one could argue that he has his fingers on the financial pulse of Australia.

Mark Bouris summarised the current economic indicators as follows

• US economy is continuing to improve.
• China running at sustainable growth levels of 7-8% pa.
• Japan has introduced a stimulus, which should see their economy benefit.
• Our Gross Domestic Product (GDP) is growing on target.
• Cost of funds for banks is exceptionally low.
• Unemployment is not of concern at 5.6%.
• Price of recourses has levelled but healthy.
• Inflation is on target at lower end of targeted 2-3%pa.

So if all this adds up to the logical decision to leave rates on hold, why were they lowered?

Mark Bouris believes the RBA for the first time in recent history has taken it upon themselves to boost the property market to lead the recovery of our economy in order to weather the slowing resources boom and expected impact of a tightening federal budget on our Gross Domestic Product.

We are already in a Sellers market in Perth and this further lowering of interest rates is expecting to see many suburbs of Perth tighten to boom conditions of demand far exceeding supply.

Time will tell if the RBA continues to take the position of stimulating the property market when all indicators suggest otherwise.

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