Media Release

RBA Survey: Experts positive about housing affordability, relief offered for commercial landlords

        • Commercial landlords who "support" distressed tenants will be offered land tax relief
        • Experts' positive sentiment toward housing affordability surges as property prices face drops
        • Cash rate holds at 0.25% after two consecutive cuts in March

7 April 2020, Sydney, Australia – Commercial landlords who "do the right thing" will be looked after by the government under a new code of conduct for commercial tenancies to be released today.

The federal government is rushing to codify a system that works for both sides, with the major carrot being an easing of land tax for commercial tenants. Residential tenants will be dealt with at the state and territory level.

Landlords and their tenants have locked horns across Australia as the two groups try to reach a compromise on the non-payment of rent during the coronavirus crisis.

Graham Cooke, insights manager at Finder, said the government's moratorium on eviction puts landlords and tenants in an unclear position.

"While landlords aren't able to evict tenants for non-payment of rent during the current crisis, the moratorium does not mean that tenants can simply avoid paying rent.

"But it's still hard to know who should take the haircut.

"Saying that both parties need to 'sit down and figure it out' doesn't necessarily solve anything – the landlord may simply be unable to absorb the rent cost for six months.

"Land tax relief is a worthy incentive to help commercial landlords support their business tenants now and in future months.

"But for residential landlords it's a different story, with the government's six-month ban on evictions a big concern for those who rely on rental income to live," Cooke said.

Economic Sentiment Tracker

Finder's Economic Sentiment Tracker gauges experts' confidence in five key indicators: housing affordability, employment, wage growth, cost of living and household debt.

This month, positive sentiment surged in relation to housing affordability.

Cooke said that the impact of the pandemic may serve to benefit first home buyers.

"With estate agents obliged to take viewings by appointment only and auctions forced online, downward pressure on the housing market is inevitable.

"Both fixed and variable rates are at record lows, putting anyone with a deposit saved in a very powerful position.

"Before the pandemic hit, the worry was that housing prices were continuing to rise even as wages, household debt and cost of living didn't improve.

"Now, after a global business disruption unrivalled in recent history, housing affordability might just come back into sight for some Aussies looking to buy," Cooke said.

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Cash rate holds at 0.25%

All 23 economists and experts surveyed in the Finder RBA Cash Rate Survey™ correctly predicted the Reserve Bank of Australia (RBA) would hold the cash rate at 0.25% on Tuesday.

Cooke said he'd be surprised if there are any further drops.

"The RBA said it is treating 0.25% as if it is 0% and say they have no appetite to cut further."

John Rolfe of Elders Home Loans said not enough time has passed since the latest round of announcements.

"The recent financial support from the Federal and State Governments needs to flow through. The RBA needs to keep its powder dry in case this gets worse," Rolfe said.

Here's what our experts had to say:

Shane Oliver (AMP Capital): "0.25% has long been identified by the RBA as the lower bound. There is little benefit to be gained by going to zero or negative based on the experience of Europe and Japan."

Alison Booth (ANU): "[The RBA] will engage in QE."

Malcolm Wood (Baillieu): "Effective zero is 0.25%."

David Robertson (Bendigo and Adelaide Bank): "The RBA have consistently stated that they consider 0.25% as the 'effective lower bound' for the official cash rate and that they have no appetite for negative interest rates."

Marcel Thieliant (Capital Economics): "The RBA has stated that 0.25% is the effective floor. More importantly, the 0.10% interest rate on reserves now acts as the floor for interbank rates. The RBA has now de facto cut rates to 0%."

Peter Boehm (CLSA Premium): "The RBA has already signalled interest rates effectively at their floor. I cannot see any material value in dropping rates further. Such a move would likely cause more harm than good."

Craig Emerson (Craig Emerson Economics): "The RBA has stated publicly that it considers 0.25% to be the lower bound."

Trent Wiltshire (Domain): "The Governor clearly stated that the effective lower bound for the cash rate is 0.25%."

John Rolfe (Elders Home Loans): "The recent financial support from the Federal and State Governments needs to flow through. The RBA needs to keep its powder dry in case this gets worse."

Angela Jackson (Equity Economics): "I don't think they will move to QE yet – we may see it once the economy is able to grow again, but until then it is a hold."

Mark Brimble (Griffith University): "[The RBA] will want to hold back and see how announced measures impact on key economic parameters."

Peter Haller (Heritage Bank): "The RBA has said 0.25% is the effective lower bound."

Leanne Pilkington (Laing+Simmons): "It is worth seeing how the recent out-of-cycle cuts play out before cutting rates to this critical mark. Certainly these are unprecedented times and the RBA has already taken drastic measures."

Nicholas Gruen (Lateral Economics): "They should, but they've said they won't. I wouldn't have taken this seriously, but Westpac's Bill Evans seems to and he follows these things."

Jeffrey Sheen (Macquarie University): "I believe that 0.25% is the effective lower bound for the cash rate, according to the RBA."

Tony Makin (Griffith University): "Hard to predict, but to cut again so soon would have minimal impact in current circumstances and add to the extreme uncertainty caused by the devastating impact of COVID-19."

Michael Yardney (Metropole Property Strategists): "There would be no benefit cutting rates again so soon, especially since the banks haven't yet dropped their rates to residential borrowers."

Geoffrey Harold Kingston (MQBS): "They correctly surmise this wouldn't help."

Dr Andrew Wilson (My Housing Market): "Will have no material positive impact in shorter term."

Rich Harvey (Propertybuyer): "RBA have already indicated in their statements that 0.25% is the lowest they are prepared to go."

Brian Parker (SUNSUPER): "RBA have made it clear that 0.25% is their effective lower bound."

Other participants: Noel Whittaker, Bill Evans (Westpac)


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