One of Australia's leading property researchers has argued that an interest rate cut would be a bad move following the share market volatility over the last week.
Andrew Wilson, senior economist at APM, has blasted 'hysterical speculation' over a possible cash rate cut by the RBA and argued that Australia's economy is fundamentally sound.
"Our biggest problem is inflation," said Wilson. "The economy is still growing. An interest rate cut would only reflect a serious global economic effect which would lead to a major loss of confidence."
Wilson conceded that consumer confidence will take a knock as a result of the share market carnage, however.
"There's already a wider slowdown in discretionary buying and selling," added Wilson. "Australians have firmly switched from spending to saving in the last few years, and that prudent atmosphere is only likely to be reinforced. The sentiment is likely to remain conservative, even while the fundamentals are strong."
Residex CEO John Edwards warned that there is more pain to come in the global economy.
"The stock market bounced again [on Tuesday]," said Edwards. "That suggests that we haven't seen the real global correction yet. There will be an interest rate reduction."
Edwards added that Residex had seen an increase in investors researching the property market.
"Savvy investors are anticipating a rate cut: when rates go down, that's typically when house prices move forward. It will be the lower end of the market that moves, although affordability will remain constrained so growth won't be dramatic."
Speculation over a cut in the cash rate has been raging since stock markets around the world began falling on Thursday night. It also appears that major mortgage lenders are also anticipating a fall in the cash rate, with a number of lenders cutting fixed-rate mortgages yesterday.
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