by Chris Becker
On this morning ABC AM program, ex-RBA and current HSBC Chief Economist Paul Bloxham stated he thinks the RBA will hold fire for the third month in a row, as fears mount of igniting the housing bubble further:
Well that’s certainly a part of the story we’ve got in mind. They face a big challenge at the moment – inflation’s in the lower part of their target band, growth at the moment is running a bit below trend.
But of course, low interest rates are fuelling a strong pick up in the housing market. House prices are rising very quickly in Sydney, they’re rising very strongly in Melbourne as well. And there’s a building boom going on. And that was established yesterday in the building approval numbers, which were again very strong.
So they face quite a challenge with setting monetary policy, with housing ramping up substantially but the rest of the economy needing a bit of support.
He further contends that any cut today will likely be the end of the easing cycle, although it could be “tricky”:
Look if they do cut today I think they’re going to be on hold for a little while. I suspect that’s the likely outcome. They’ll have delivered two cuts in the first part of this year and they’ll be watching to see what the impact of that will be on the economy.
It’s been a very tricky year I think in the scheme of things.
No talk of next weeks Federal Budget, rising unemployment, slowing national income, or other structural pressures (from Bloxo or the interviewer to be fair).
Again the Test Match analogy is apt. Monthly interest rate cut machinations are but an “over” in a long running Test. Hold/cut this afternoon, its still a tired fast bowler with a gammy knee, with a cigar smoking spinner out of his depth on the other end, going up against a fierce batting line up as the country tries to protect a slim 100 run margin on the board on day two.