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Mixed indicators but rate cut on the cards

By Staff Reporter
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The economic indicators are mixed, which leaves many unsure whether the Reserve Bank will move their rates tomorrow, but one economist remains confident we’ll see a drop.

Clearance rates, as one of the most timely indicators that the RBA considers, are up over this week.

“Across the combined capital cities, the auction clearance rate was recorded at 67.3 per cent over the week, up from 64.5 per cent the previous week,” RP Data’s weekend market summary explained.

Melbourne saw the clearance rate increase from 68.1 per cent last week to 70.4 per cent this week. Sydney also saw an increase to 72.4 per cent, from 70.6 per cent.

Despite this, there were actually slightly fewer auctions held this week, the summary noted, down to 1,632 from 1,658.

AMP Capital’s Shane Oliver recently indicated that he is looking for a 0.25 per cent cut tomorrow, based on indicators that are performing below expectation.

“The past month has seen some softer news regarding the global economy, falls in commodity prices and a range of disappointing data in Australia including for various business surveys, building approvals, consumer confidence and job vacancies,” Mr Oliver noted.

“So with the response to the rate cuts of the past 18 months proving to be very tentative and the mining investment slowdown now looming, it would make sense for the RBA to provide a bit more insurance for the economy by cutting interest rates again.”

Mr Oliver recently told Smart Property Investment that "These mixed signals are normal in the rate cycle. Often when you’re at a turning point in the rate cycle you start to see mixed indicators".

These mixed indicators can often cause havoc around predicting changes in rates, with some previously predicting a rate increase in the final quarter of 2013, but discussions about cuts still on the cards.

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