Two interest rate cuts predicted in the 2nd half of 2019Tom Uhlich
The cash rate set by the Reserve Bank of Australia (RBA) could be on its way to a new historical low of 1.00% this year, which will be the result of two rate cuts later in the year, according to the major economists in Australia.
All 31 experts and economists in Finder’s RBA Cash rate survey expected the hold at 1.50% on 5 March 2019, but their predictions that the next move will be a cut continued to pick up steam.
In the survey, over 50% forecasted the cash rate would drop to 1.00% before the year is out.
August and November were the most popular months for a forecasted cut.
With the housing market continuing to fall, and banks increasing rates outside of the RBA, experts seem to be sure we’re looking at at least one cut in 2019, if not two at the backend of this year.
Chief economist at My Housing Market, Dr Andrew Wilson, said an easing off of the cash rate is overdue.
“Although recent wage data was reasonable – not good, not bad – RBA has conditioned the market to now expect a long-needed cut.
“This cut will attempt to revive consumption, which is now likely to also be impacted by continuing weaker housing markets,” Wilson said.
How does the Australian interest rates compare to the rest of the world:
USA 2.50% last direction > UP
Australia 1.5% > DOWN
UK 0.75% >UP
Canada 1.75% >UP
China 4.35% > DOWN
Japan -0.10% > DOWN
NZ 1.75% > DOWN
Russia 7.75% > UP
South Africa 6.75% > UP
Turkey 24% > UP
What some of the economists had to say:
Shane Oliver, AMP Capital: “Things aren’t yet weak enough to push the RBA to cut but they aren’t strong enough to push it to hike either.”
Mark Brimble, Griffith Uni: “Bias is moving toward rate reduction, and while there is a case for this in my view, the RBA is likely to want to hold position for now.”
Tim Reardon, Housing Industry Association: “Insufficient data to conclude that the poor results from end 2018 will be long lived.”
Michael Witts, ING: “Their recent comments suggest the outlook for rates is finely balanced.”
Peter Boehm, KVB Kunlun: “The overall direction of interest rates appears to be at a crossroads. For now, I expect rates to stay on hold but recent mixed economic data (in particular the slowing of the housing market) not to mention what’s happening internationally (political unrest, trade wars, strains on international relationships) is adding a fair degree of volatility to the economic and financial landscape, which may well last during the course of 2019.
Leanne Pilkington, Laing+Simmons: “There’s somewhat of a stand-off in the housing market at the moment. The level of buyer interest is encouraging but reduced accessibility to finance is having a dampening impact on transactional activity. While this issue runs deeper than merely the cost of finance, a hold pattern remains the prudent course for the RBA in the current climate.”
Michael Yardney, Metropole Property Strategists: “The RBA has acknowledged that our economy is weaker and the likelihood that the next movement in rates is down. However, it is hoping for employment growth to buoy our economy and it is likely to wait a month or two and see how our property markets are faring before acting.”
Noel Whittaker, QUT: “There is no way they will raise them and a drop would be premature.”