Jeez this is bad, from Forexlive:
Client note from UBS economists (via MNI):
RBA’s “neutral” cash rate level is lower than before at around 3.75% to 4.0%, compared with “traditional” neutral cash rate of 5.5% to 5.75%
They cite:
- “A combination of wider domestic lending margins relative to the RBA cash rate
- The likelihood of slower trend domestic GDP growth
- The likelihood the AUD is going to remain above its post float trade-weighted exchange rate average … all point to a lower RBA neutral cash rate over the next few years”
They say:
- Not changing their forecast that RBA will push the cash rate up sometime around mid-2015
- Suggest the extent of upward rate cycle may be less than in the past
These sell side and bank guys are so ponderous. Rates are not going up, they’re going down. Once macroprudential launches in the new year housing will slow and the income as well as capex shocks will roll over the economy. The response will be rate cuts.
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If I’m wrong it will be by degrees. If rate rises are required to slow housing then 50bps will do it, then they will fall again with house prices.
I’d be prepared to put pretty decent money on Australian interest rates not rising again this decade.
