Deflation triggers official cash rate cut

By Greg Bell

Australia's economic turmoil may be about to steady, as the Reserve Bank of Australia (RBA) decided to cut the official cash rate (OCR) to a historic low. The last time the monetary policy committee took this step was back in May 2015, and a year later, another 0.25 per cent drop has been registered.

Although there were various reasons behind this decision, one of the most prevalent was the slowdown in inflationary pressures. Now this action has been taken, the RBA hopes this will be one less risk the Australian economy has to face.

This will have ramifications for various aspects of the economy and may even encourage more people to buy commercial property on the Gold Coast.

How inflation has been faring

The Australian Bureau of Statistics (ABS) reveals that inflation has experienced its fair share of ups and downs lately. The Consumer Price Index (CPI) for the March quarter declined 0.2 per cent, following a rise of 0.4 per cent in the three months to December 2015.

Perhaps most concerning was that six out of the 11 groups used to calculate the CPI recorded a fall in the three months to March. The most significant fall was for transport (down 2.5 per cent), while recreation and culture ranked in second place with a decline of one per cent.

The RBA described these results as "unexpectedly low", which isn't great for the future of the economy. So far, the low OCR has helped support demand, while the depreciation of the Australian dollar has given the traded sector the assistance it needs.

Now that it's been reduced even further to 1.75 per cent, there's every chance this will be able to continue. If conditions in the national economy are favourable, businesses are likely to think more carefully about leasing commercial property and expanding their operations.

Securing favourable rates for commercial property

Another advantage that the OCR reduction will have is the potential for lending rates on Gold Coast commercial property to be lowered. However, this will only happen if mortgage companies pass on the cut-price rates to their customers.

The Housing Industry Association (HIA) explained that this is one of the problems that emerged last time the rate was reduced – lenders didn't ensure their clients would benefit.

"Latest ABS data confirms that price pressures in the economy are very well contained," commented HIA senior economist Shane Garrett.

"Against this backdrop, lower rates will provide real benefits to households and businesses right around Australia. Today's rate cut represents a timely and measured initiative."

It's evident that not only could inflation become less of a risk to the Australian economy as a result of the May cash rate decision, but lending for commercial property on the Gold Coast may also soar. Many of the country's biggest banks have already indicated they'll be passing on the lower rate to customers – and there's a strong possibility that others will follow suit.

Make your move on the commercial property market

Many investors have been biding their time before investing in Gold Coast commercial property, and this recent announcement could be just the encouragement they need. If you're one of them, make sure you speak to Ray White Surfers Paradise Commercial for a helping hand entering this lucrative market.

We've got an extensive range of commercial properties on our books, including industrial and office leasing on the Gold Coast. You might have a specific location in mind or need an expert to guide you – in either case, don't delay in giving us a call.

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