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Rate cut expected soon

By Reporter 26 November 2012 | 1 minute read

Recent data points to the likelihood of a rate cut next month, according to a leading economist.

AMP Capital’s head of investment strategy and chief economist, Shane Oliver, noted in his latest weekly economic and market update that we should be expecting the RBA to lower rates in December.

“Australian data releases were light on over the past week with the Westpac leading index recording reasonable growth but skilled job vacancies continuing to slide, pointing to a weak labour market ahead,” Dr Oliver’s assessment stated.

He pointed to the recent minutes from the RBA’s last rate meeting, as well as a speech from the Reserve Bank’s governor, Glenn Stevens, that stated “further easing may be appropriate in the period ahead” as evidence for a potential shift.

“While a gradual recovery in both dwelling and other business investment was anticipated, assisted in part by the lower level of interest rates, there was also uncertainty about the timing and magnitude of this pick-up,” Mr Stevens continued.


As a result, Dr Oliver pointed to further cuts as the likely outcome.

“Our assessment remains that the RBA has not done enough to ensure that non-mining demand will fill the gap left by slowing growth in mining investment next year. As such we remain of the view that more rate cuts lie ahead, probably starting again next month,” he said.

Further expected data will also be modest, he believes, with new home sales results on Wednesday and results of the growth in private sector credit on Friday, expected to show modest growth.

Rate cut expected soon
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