Shane Oliver: Next RBA move on interest rates is down

Via our Shane:

Given the combination of falling house prices, tightening credit conditions and constrained growth which will keep wages growth weak and inflation below target we are changing our view on the RBA from being one of rates on hold out to second half of 2020 to now seeing the next move being a rate cut.

However, with the RBA still seeing the next move as being up it will take them a while to change their thinking so we don’t see rates being cut until second half next year.

It will be earlier.

Comments

      • Cutting rates might not drive up prices much (if at all) if credit restrictions remain tight.

        What they might achieve is
        – reducing defaults / mortgage stress (lower repayments)
        – boosting the economy a bit
        …thus reducing the falls somewhat.

        Which is why they will do it. And why should have whacked on credit restrictions / MP when they cut in 2016. C#nts.

  1. MediocritasMEMBER

    US yield curve inverted so it looks like the tightening cycle is about to finish. The RBA, being behind the 8-ball as always, didn’t even manage to tighten once during the (rather short) cycle, even though member banks were passing the international pressure through independently.

    Clowns. They’re so far out of touch that it wouldn’t be surprising to see the RBA go for a raise when the US starts to turn down again.

  2. SupernovaMEMBER

    Not sure/convinced how a rate cut would help when in real terms Auz rate is already below zero…..bloody stupid and this suggested policy move is more desperation. In the long term China’s development has been a curse to Australia, especially in accomplishing a casino-property industry…..now for the restructuring (away from property).

  3. Millers Point terraces at The Rocks succumb to falling house prices
    https://www.afr.com/real-estate/millers-point-terraces-at-the-rocks-succumb-to-falling-house-prices-20181204-h18pmo
    [The much-coveted historic terraces at The Rocks in Sydney’s Millers Point are just as vulnerable to the housing downturn, after a landmark Georgian terrace with approved development plans sold for less than its original purchase price.

    The second owner of the sandstone property at 24 Argyle Place, Millers Point, sold the home in October for $2,675,000 after paying $3 millon for it in 2016.]

  4. Government media message … GDP is strong, jobs and growth, investment in education, hospital and infrastructure – delivering as promised.

    RBA silent message – rates are still at emergency level and we haven’t seen fit to move them for a long time. Potential next move is down, which says abandon ship … this baby is going under!

    So funny how this stuff is put out into the public areana … and we all nod agreeingly.

  5. Maybe the RBA will cut – and tell everyone just how bad things are. Even if they do cut, I don’t think it will make much difference:
    1. Sentiment has firmly changed.
    2. The banks will keep some (? half) for themselves

    I think the jig is up.

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