Australian Real Estate Compensates Well For Mining Bust

Contrary to speculations, RBA has kept the cash rate unchanged in September. Resting at 2.5%, it has already seen a decline of 225 basis points since November 2011. RBA governor Glenn Stevens believes that the monetary policy setting is “appropriate” and does not warrant further reduction in cash rate, reports Michael Masterman for The Advisor.

Election results have also witnessed a rise in consumer sentiment and more of them are optimistic about the economic prospects of the country. In fact, nearly 3% more respondents (to a survey) believe that Australian real estate is a nice place to invest in (since a survey was last taken out in last September).

For some time, Australian economy may perform below trend and this is largely due to the fizzing out of the mining sector. Having said this, the property market is giving fairly positive signals and the response in capital cities has been especially heart-warming. Perhaps the only cause for concern is the decline in new home construction.

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Do you think inflationary pressure will set in once the interest rates climb close to 5%?