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Interest rates have not fallen enough yet

By Reporter 05 November 2012 | 1 minute read

There is still a case for a rate cut tomorrow with the RBA to be looking at mixed figures, according to AMP’s head of strategy and chief economist, Shane Oliver.

Interest rates have not yet dropped far enough that non-mining demand will be able to offset a loss of momentum in that industry. “In other words interest rates will need to fall further,” Mr Oliver said in his weekly report.

“A benign reading for September quarter producer prices suggests inflation is no barrier to further rate cuts.”

While interest rates may be getting traction, with building approvals rising solidly over September (for the second consecutive month) and credit growth accelerating slightly, the RBA needs to look at the whole picture.

“[As] the strength in building approvals was concentrated in apartments, which are normally volatile with private house approvals tracing out only a mildly rising trend, credit growth remains very weak and new home sales fell again in August,” he said.


“What’s more, the manufacturing PMI remains in the weak range it has been in for some time - home prices fell one per cent in October and export prices fell another 6.4 per cent last quarter, highlighting a loss of national income.

“On the data front in Australia, expect retail sales to remain softish and the trade deficit to remain wide (both Monday), September quarter house prices (Tuesday) to record a 0.5 per cent gain and employment to have gained 5,000 in October (Thursday) resulting in a rise in the unemployment rate to 5.5 per cent.”



Interest is the amount of money charged by a lender or financial institution for a loan, which is calculated as the percentage of the principal amount paid over the loan term.


Rates refer to a fixed price or an amount charged by sellers or providers for their goods and services.

Interest rates have not fallen enough yet
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