Five reasons the RBA will likely cut rates again
5 August 2015
Columnist: Shane Oliver - SMSFAdviser
While it’s a close call, chances are the RBA will cut rates again before year end, reflecting a poor business investment outlook, weakness in commodity prices, the Australian dollar remaining too high and slowing momentum in home price growth.
As widely expected, the RBA left interest rates on hold at its August board meeting. While it appears to retain an easing bias with its assessment that growth is “below longer-term averages” and that the economy is likely to have “a degree of spare capacity for some time yet”, it appeared to soften this bias by removing its previous reference to a further fall in the Australian dollar seeming “both likely and necessary”.
I am not in the gloomy camp on the Australian growth outlook. Low interest rates and the collapse in the value of the Australian dollar are helping the economy to rebalance which is seeing those sectors of the economy that were repressed through the mining boom return to strength. This is reflected in a reversal of the "two speed economy" which has seen Western Australia drop to the low end of a comparative ranking across the states and territories and Victoria and NSW push to the top.
