My judgement about the very short-term RBA outlook comes down to a judgement about the state of the Australian housing market.
To put it plainly, I think that you can see the work of easy monetary policy in the Australian housing market — and that the RBA shares this view. So, with policy already clearly expansionary, the burden of proof for further easing is higher.
Happily for my theory, the Auction data supported my judgement last weekend, with the national clearance rate making a high for this year of ~67% (this may yet be revised, but it’s the latest data as of writing).
The reason it made the high is because this is the first weekend in which both Melbourne and Sydney clearances topped 70% at the same time — both have made it above 70% for some particular weekend this year, but not on the same weekend.
With these clearance rates, ongoing modest (single digit) capital price growth should be expected in the near term.
Another test of market tone is volume (probably because folks don’t like to sell at a loss, weak markets are characterised by low turnover) — and this has been firm of late.
Auction volumes nationwide were about 20% higher in April 2013 than 2012 — with Melbourne volumes +28%yoy (after +10%yoy in March) and Sydney volumes +15%yoy (after +25%yoy in March).
Even the depressed Brisbane housing market appears to be coming back, with clearance rates now ~40% (not fantastic, but it’s well up from the depressed levels seen in 2010-11).