Once again interest rates didn’t fall but they should have according to Michael Matusik and he continues his call for a 2 per cent cash rate. In similar sentiments, market analyst Catherine Cashmore says “Once again the drop in interest rates has been promoted widely as “good news” for the housing market, with Wayne Swan taking ample credit as he attempts to persuade public ears that record low rates are solely down to “responsible” fiscal policy.” Casmore points out that ….” Whilst a drop in rates may on the surface bode well for mortgage holders wanting to pay down debt, the bleak reality remains that for savers, many of whom are would-be first-home buyers, the news is not good at all. Any long term downward direction in rates should always be considered a concern – they sit at the seat of a number of economic problems, and point firmly toward a trend of lower growth. Michael Matusik believes that, as in previous cycles, prices will improve. He says there are five phases of the property cycle – trough, upswing, peak, downturn & recovery. I will tell you in a moment where he thinks we are right now. According to Michael Matusik, since the late 1800s there have been ten cycles in Australia, which have averaged eight years in length from trough to trough or peak to peak. Matusik goes on to say that in the periods of growth we see values rise by 11% per annum and that periods of decline, averaging three years in duration, see values fall on average by 5% for each of the three downturn years. Overall, Australian residential property owners have historically enjoyed annual capital gains of 8.5% per annum when property is held for a whole cycle. Matusik says that many residential markets across Australia are in the recovery phase of the property cycle.