THE banking sector, fresh from posting another round of record interim profits, is under pressure to pass on today’s interest rate cut by the Reserve Bank of Australia.
The RBA surprised at least half the market today by cutting the official cash rate by 25 basis points to 2.75 per cent.
The call was an even-way split among economists, half of whom saw the strength of retail sales in the March quarter as a reason for the central bank to stay put for another month.
National Australia Bank has been the first to move, passing on the rate in full this afternoon, which immediately puts pressure on the other banks to follow suit.
The Gold Coast development industry has welcomed the RBA’s decision, with Gold Coast Logan Urban Development Institute of Australia branch president Steve Harrison (pictured) giving it a “thumbs up”.
Harrison says the move will assist the development and construction industry and complement the positive incentive measures already being taken by local councils and the Queensland Government.
Harrison says these incentives have led to an increase in activity and a renewed focus on Queensland as a place to do business.
"The Reserve Bank has made the right decision and this will give confidence to people to spend and assist the overall flagging business and development sector," he says.
"This is the perfect time to provide an extra stimulus to the local economy.
"We have seen the introduction of the Queensland Government's Great Start Grant campaign which doubles of the former new home buyer grant from $7500 to $15,000.
"The Gold Coast City Council's Construction Kickstart Initiative which waives infrastructure charges and encourages entrepreneurs to open up small businesses is one of the most comprehensive incentives ever put in place by any council.
"Initiatives such as these mean that the Gold Coast and Logan are once again becoming competitive as a destination for business investment.
"The cut in interest rates will add to this mood of optimism by making investment more attractive for prospective purchasers of homes and encouraging further growth in the construction sector."
Commercial real estate group Colliers International says the rate cut must be passed on in full, although he remains skeptical that all banks will do so.
“If they did it would be great news for the property industry,” says Mark Courtney, Colliers International’s research director.
“Another 25 basis points off the mortgage variable rate and that becomes interesting.
“We’re at the point now where housing finance figures are well up from the lows of 2010, but they are still below the five-year average.”
Courtney says if the banks fail to pass on the rate cut, it will still prove to be a stimulus for the overall economy, which would feed back into property markets.
“One of the biggest things this reduction could impact upon is the high Australian dollar – it could limit any further potential upward pressure on the dollar,” he said.
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