The official Reserve Bank cash rate may be at least 1 percentage point higher than its record low 2.5 per cent by the fourth quarter of 2015, and as high as 4.25 per cent, economists say.
The Reserve Bank of Australia may have withdrawn almost all of its interest rate stimulus by the end of next year to prevent an inflation blowout and potential distortions to the housing market.
According to a comprehensive survey of more than 30 economists by Bloomberg News, 19 of 32 analysts expect the cash rate to be higher within a year.
The results suggest monetary policy will be gradually returned over the next two years to what economists regard as a “neutral” setting, where interest rates neither drag-on nor stimulate growth.
There is zero prospect of rates normalisation by 2015 and probably 2020 (OK, nobody knows that !). We’ve got this to chew through:
The closure of the car industry as well; the great China adjustment; the housing bubble can’t be let run much further, the looming baby boomer out-flux. You get the picture.
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.
