Bassanese sees rate cuts!

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According to David Bassanese:

As a result, the RBA is likely to remain comfortable in retaining its neutral policy bias. Indeed, if the Australian dollar remains uncomfortably high and business confidence continues to wind back, the RBA remains well placed to even consider a return to an easing policy bias.

To my mind, the RBA has already been too spooked by the recent narrowly based rise in Australian house prices and was too quick to abandon its jawboning strategy of talking down the Australian dollar. The result is that there has been across the board strength in the Australian dollar so far this year, which cannot simply be blamed on an unusually weak US dollar.

No, not entirely, though as I showed this morning, it’s been a powerful updraft. As for rate cuts, I still think not for this year. The housing bubble is out of control so no more cuts are a no-brainer until it slows. Next year will be a real chance, however, as iron ore continues to drop, the capex cliff steepens and the “recovery” never arrives.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.