Westpac has predicted that the Reserve Bank will cut the interest rate four times in 2012 to avoid hurting an economy that is already showing signs of contraction. According to Westpac chief economist Bill Evans, there will be a sequence of rate cuts beginning with 25 basis points in December 2011 and through 2012 totalling 100 basis points prior to a period of steady rates in 2013.
Currently, the credit markets tip a nearly a one-in-three chance of a rate cut when the RBA meets in August, while the outlook over 12 months suggest the interest rate will fall from 4.75 per cent to 4.25 per cent, according to Credit Suisse.
Homes prices have dropped 2.7 per cent in the first five months of 2011, according to RP Data. The Westpac-Melbourne Institute Consumer House Price Expectations Index, released today on 15/07/2011, showed more pessimism about the direction of home prices in the coming year, matching similar results from a National Australia Bank real estate survey released yesterday.
I believe if the interest rate will fall by 1 per cent we will see the property market will become active again in late 2012. This mean any drop in property price in the year of 2011 will leveled out by the future increase in 2012 or later.