TIP: who's passing on the October rate cut, prices up as listings dry up, building approvals down

"Reluctant" decision to cut the cash rate to 0.75 pc puts the cat among the pigeons


Rising unemployment, stagnant wages and the unpredictability of the global economy were big factors in yesterday's decision by the Reserve Bank to bring official interest rates down another 25 basis points. Governor Philip Lowe also warned the central bank will cut further if it has to - which has sparked speculation that we're a mickey hair away from quantitative easing measures being introduced (read: printing more money).


Dr Lowe's crew apparently didn't want to cut rates again this month - but everyone else in the developed world is doing it, and there's not a lot of action from other parties to address problems within the Australian economy. The federal government is staunchly defending it's new-found surplus and according to this article, is hoping a smokescreen of cheaper credit will keep things from getting much worse between now and its next budget in May 2020.


Speaking of cheap money:


Australia's largest home lender, CBA cut owner-occupier key rates by 0.13 per cent to 4.80 per cent in the wake of the RBA decision. Investors on principal and interest also got a 0.13 per cent cut, while interest-only investor loans dropped the full 0.25 per cent.


NAB was also kindest to interest-only loan holders, giving them a whopping 0.3 per cent cut. It also spread a little more love to owner-occupiers compared to CBA, with a slightly more attractive 0.15 per cent decrease.


We're yet to hear from Westpac or ANZ, the latter of which is expected to prove the most competitive given how much ground it's lost in the home lending space of-late. Stay tuned.


Prices up, stock down, approvals drop again


A couple of hours before the RBA rate announcement yesterday, CoreLogic released its property price figures for September. Average property prices in Sydney and Melbourne jumped a massive 1.7 per cent last month - almost double the national figure of 0.9 per cent.


It's hard to believe prices were still falling only four months ago. Ben Udy of Capital Economics is on-record today saying there's little chance of such sharp increases being sustained due to sluggish income growth - but with money getting even cheaper this week, that's a prediction to take with a grain of salt.


So, bubble fears abound. That won't be lessened by SQM Research's offering yesterday that available housing stock levels fell 4 per cent across the country last month, after jumping 2.9 per cent in August. Sydney stock dropped 5.7 per cent, Melbourne 5.8 per cent and Hobart 6.4 per cent in September.


At the same time, the ABS was releasing its building approvals results for August, which fell another 1.1 per cent across the country. Prices may be up in Sydney and Melbourne, but this is yet to flow through to new housing construction orders.


This won't appear unusual for anyone who understands the relationship between the buying cycles of existing and new homes - but it does set Australia's two largest housing markets up for a supply-and-demand clash.