From the AFR:
A CLSA analyst who told investors to sell US mortgage securities before the subprime disaster says interest rates in Australia will be less than 1 per cent within two years and could even go to zero.
Christopher Wood, who is the managing director and chief strategist of the broking firm, is sceptical of both the impact and likelihood of a change in US monetary policy.
“It’s not whether interest rates go up, it’s whether Australian interest rates go to zero,” Mr Wood said in an interview with The Australian Financial Review.
Spot on, though not to zero, unless the world is totally insane. Australia needs a spread to finance the current account deficit, not least because the Budget is deteriorating when the house prices bubble is going to ever new highs. When that turns and the AAA goes, we’ll need something to attract capital.
My guess is 75bps as the cycle low during the next global shock but 50bps might be possible if everywhere else is still at blot.
