Bassanese: Rates going to 1.5% this year

From The Australian:

Betashares chief economist David Bassenese predicts the RBA will cut the official cash rate from 2.25% to 1.5% by late 2015, and the A$ will fall from $0.7730 to $0.68 by  year end.

“Given the Reserve Bank of Australia’s demonstrated concern over economic growth, we now expect the Bank to cut the official cash rate to 1.5% by late 2015,” Mr Bassenese says.

“The next interest rate cut seems likely next month. Together with our view that the United States Federal Reserve will begin raising interest rates by mid-2015 – and ongoing likely weakness in commodity prices – we now see the $A falling to US68c by year-end.”

He says the key to further interest rate cuts is the expectation that the RBA’s hoped for rebound in non-mining investment will continue to disappoint.

At last someone wakes up. This is very possible. In fact, if APRA does its job we’ll go even lower.

Any short term play on this is better directed through liquid shares or playing the Aussie dollar than it is in property, given that when the reversal comes it will be savage and an easy exit is vital for risk management.

In fact, my advice is to get moving on deleveraging as it happens. We’re entering the end game of a thirty year credit bubble.


  1. AlbyManglesMEMBER

    Sure does feel like the end game has started, and some kind of shock from china will come for sure…. but lucky we’re different

  2. Seems odd that to fix a credit bubble we need rates around 1%. It demonstrates how badly our policy makers have performed over that period.

  3. ceteris paribusMEMBER

    C’mon HnH. Sketch your views on how this looming recession is going to play out, especially across the asset classes. You can plaster the page with disclaimers. We already know you are not infallible like the Pope.

      • So that’s what you’re doing, calling for cuts to lower the dollar so MB memberships are more appealing to internationals 😉

      • The Traveling Wilbur

        Speaking of which (dollar value), if we do get 75bps of cuts in less than 10 months (“late 2015”) then the AUD won’t be 0.68, the biggest it’s going to be is something that has a 0.5 in front of it. Won’t neccessarily stay there long… but there’s no way it’ll be @ 0.68 in the month after the last 0.25% gets applied. I’m suprised you didn’t say something similar Mr H?

      • ceteris paribusMEMBER

        Yes, you have clearly called the commodity bust, the collapse of the AUD, the resurgence of the USD and the fragile nature of the bubble in Aus. Property. Very Insightful stuff. And profitable stuff too for punters

        But people are genuinely interested across a range of crystalballing across the total range of trends, even if timing and 100% accuracy is always impossible.

        What about your comment the other day about bank cash deposits being “safe as houses”. My instant question is how straightforward or cryptic is that comment in the current circs. In addition to cash, whatt about the stability of various sectors of the Australian debt?

        It would be defensive to assume that this request is telling you what to write or saying what you write is not great stuff. It is a simple expression of interest.

    • AlbyManglesMEMBER

      which ever website or expert or economist gets the call right on when the aussie housing bubble bursts will be a god forever, that would have to be the holy grail of calls

  4. They’ll go lower regardless of what APRA does. Hit the bid in 2016, there is at least one hell of a spring selling season to come in 15.

    • Cutting it too fine. For a couple of % points you stand to lose a shitload. The lot maybe. But maybe picking the absolute top is something people do consistently and accurately? Nah.

      The whole thing is unsustainable, David gets it.

      Just before the real fear comes the sweat – and we’re there. That sweaty, giddy, greedy moment when the punter goes all in.

      Rates crashing, free money, FOMO for the young NHB’s – rising unemployment, commodities price bust, hollowed out economy.

      Straya’s different.

      • The Traveling Wilbur

        Sorry, beg to differ. I for one am awesome at picking the top. As soon as I dive in, that’s exactly the point at which the market begins to bottom. Unfortunately, always (not 95%, not 99%, but always), that’s when I’m buying in, not selling. Apparently Mr TMarsh has a mate with similar skills who’s bought a house recently. I suspect we are all doomed.

      • #PartyPoopers #DoomSayers #ProphetsOfDoom

        This whole thing is so very sustainable, David does not get it at all = inflation low and falling, worldwide ; Australia’s interest rates obviously far far too high, relatively ; currency relatives in terms of purchasing power parity then results in our currency not necessarily crashing as falsely anticipated here on MB.

        The party has only begun … sweat or fear should be absent ; it’s presence is evidence of an hallucination effect , similar to ‘hearing voices’ … it’s not normal !!

        The rational and informed should get in , suggestions of actions to the contrary are absurd, but then again ‘false beliefs that are resistance to change’ are part of the definition of D*%#@1*N ; So, I understand where this is coming from, shame.

        Buy banking shares and loads of housing in Syd and Melb ; cheap, buy lots … now make money, for a change.

      • The Traveling Wilbur


        What’s not to like? ASX is hitting record post-GFC levels, property is in demand, bank rates have never been cheaper, consumer confidence is back up and positive (finally) – it’s a wonderful world in which we live. Petrol’s never been cheaper in recent memory either and you can even pick up physical gold on the cheap if so inclined. By all measures Mr Tones is doing a stellar job!!

        Definitely time to borrow as much money as possible and buy shares in publicly listed property management companies (especially those with large interests in commercial real estate in WA). What could possibly go wrong?

        I have a sudden urge to doff a bowler hat and adopt a penchant for monacles. Must go have a lie down now.

      • #guruUptownFunk #UptownFunkIsMyHero #OrtegaIsNot #NeitherIs TheTravelingWilbur


        You write : ” Must go have a lie down” . Know what they say what happens when you ‘snooze’ ( Answer: you LOOSE) …. I get the impression who been sleeping for a very long, long time. Rip Van Winkel ??

      • Could be cutting it fine, but everything’s a gamble. For mine the crunch starts 2017, so a 12mth buffer looks reasonable.

      • #guruUptownFunk #UptownFunkIsMyHero #OrtegaIsNotMyHero #TheTravelingWilburNeither #Nor8888 #WhatAbout8888,Gosh,TheThingsHeWrites!??


        You write : ‘Could be cutting it fine, but everything’s a gamble. For mine the crunch starts 2017, so a 12mth buffer looks reasonable’.

        It’s 2015 now. 2017 minus 2015 = 2 years = 24 months (Oh, sorry, should mention: There are 12 months in one year)

        Think of BUYING, not selling …. unsubstantiated fear is called ????

        +1UptownFunk -1AllOthers

      • GunnamattaMEMBER

        why would anyone go into real estate now when the AUD depreciation is so clear on the radar that even mainstream media guys are picking it up?

        Between the start of last August and now the AUD has gone from circa 0.94 to 0.77. – we are looking at nearly 20%.

        All of a sudden the bus for 0.68 by year end is starting to fill up (with people talking 2 or maybe even 3 25bps cuts this year). – so theres another 12%.

        TestosterTone or Joe fuck sentiment with the budget again? (well that will help you investment position)…TestosterTone or Joe fuck the AAA with a spendathon budget? (well theres a little somthing in that for you too). An election coming up you say? Fruitcakes in the senate? increasingly pissed off punters getting agitated? Well that could add to some political volatility (enjoy your politics a little more!).

        If, like me, you take the view that even that isnt going to generate some form of demand rebound and have your sights set for maybe 0.60, or even 0.50, or even (hallelujah brother) the 0.40 that HnH tossed into contemplation a few weeks ago then you can have the best of both worlds.

        ……and (if you are like me) you may have the suspicion that the slumping currency may in the long run actually have its own implication for the property market. Of course that involves a risk, but hell, have a look around and ask if everyone in your nick of the woods is upbeat about the future, if they think their gig is going to cover them in clover. If all is good and well head on out and take on that mega mortgage. But a handy side punt could be the buck, and I would also point punting types in the direction of HnHs USD exposed industrials on that basis. And should that AUD look like a solid rebound (as for sure it will from time to time) take the chance to load up some more, or keep your eyes out for exposure to stocks doing well in a rising unemployment environment.

        …..uptown funk can mean student box in need of renovation with louvred windows, a laminated benchtop and green shag….

      • @funky cold medina
        Go back and read the discussion carefully. Let us know when the penny drops, since you have so many of them!

  5. Get moving on deleveraging???
    Now that’s a contradiction. You seem fully supportive of the Glans Penis’ rate cuts.
    The purpose of the cuts is to make leveraging cheaper and easier.
    Yet, you say avoid leveraging. Hence, you’ re effectively saying that
    the only benefit of his cuts is lower exchange rate.
    But, that could have been achieved without the cuts…
    Correct me if I’m wrong.

  6. Ignore my ignorance – but does every % point change now have a much bigger impact?

    i.e. a 0.25% change when rates are 10% vs. a 0.25% change when rates are 5% – the impact is double as much.

    Was just thinking about this last night. I pay around $1000 a month in interest on my mortgage, at a rate of about 5.25%… if rates dropped 1% – then my interest bill would actually reduce 20% , to around $800 per month.

    Heading to 0% interest rates in theory is just another form of a slow burn to a debt jubilee. If each economy runs low interest rates for long enough, the debt levels will eventually be leveled off.

    • This one gets me too Raglan. There’s plenty of talk about incremental cuts of 0.25 percent as though it represents the same measure of stimulus every time, but never about the impact of that coming off a much lower starting point.

      It is just bizarre.

    • The rational price of real assets in a zero interest rate environment, if one expects such to continue indefinitely…

      … is infinite.

  7. “We’re entering the end game of a thirty year credit bubble.”

    If you honestly believe that then I don’t understand why you get so angry at those who call you out for twaddling about “politically feasible” solutions… because when the SHTF (assuming you’re right & the bubble pops) it will become obvious in time that politically feasible solutions implemented today will be nothing like the actual solutions we need tomorrow.

  8. How do hedge against this if we are fully invested in equities? Bear eft beta share or just puts against asx 200?