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No rate cut down under

By NexChange
Capital Markets

The RBA minutes painted a pretty picture of Australia’s economy today, citing controlled inflation, a “rebalancing” away from the mining sector, and a surge in exports. More importantly, it telegraphed that the RBA currently is in no rush slash rates again. Still, the members seem to be pretty worried about “the key domestic sources of risk to financial stability,” the nation's local property markets:
“Members further observed that the risks in commercial property and the property development sector were rising. Building approvals for new apartments remained very strong over 2015, even though rental markets appeared soft in some areas. The divergence between commercial property valuations and rents had widened further, with strong domestic and foreign investor interest for new and existing office buildings in particular, even though vacancy rates were quite high…The key domestic sources of risk to financial stability, and stability of the Australian economy more broadly, revolved around developments in local property markets. Members noted that growth in lending for housing had been steady over recent months and that there were some signs of an easing in the strong rate of increase in dwelling prices in Sydney, in particular, although trends had been more varied in a number of other cities.”
AUD/USD climbed as high as $0.7276 following the release, however, swaps – still spooked by China – are still pricing in a 58% chance of a November rate cut.
Photo: Michael McDonough

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