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Mining slowdown will help lower rates

By Reporter 07 January 2013 | 1 minute read

The slowdown of the mining boom spells good things for the rest of Australia, according to an economist.

With two rate cuts expected, bringing the cash rate to an expected 2.5 per cent by mid year, AMP’s chief economist, Shane Oliver, told Smart Property Investment that this is partly in relation to the mining slowdown.

“In previous years, [the Reserve Bank] put a lot of emphasis on the mining sector, but more recently as mining is softening they’ll probably put more weight on the rest of the economy and bring it back to a balance.

“I think this shift back to a more balanced approach is probably the right thing for the country,” said Mr Oliver.

He explained that the Reserve Bank will start to look at reviving other industries, such as housing, to offset the downturn.

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In his latest Oliver’s Insights, he noted that economic data had remained soft over the past two weeks, “with flat credit in November, a fall in house prices in December” and weaker indicators for manufacturing and services conditions.

“This is all consistent with the RBA still having more work to do on interest rates,” he said of his thoughts about the mid-year rate lows.

A cut to two per cent is, however, unlikely, due to the improving global economic outlook, “highlighted in particular by the rebound in the iron ore price up to around $US150 a tonne from a low in September of just $US85 a tonne”.

RELATED TERMS

Capital

Capital refers to the financial resources that are available to be used for income generation.

Interest

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.

Property

Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.

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Real estate is a type of real property that refers to any land and its permanent improvement or structures that come with it, whether natural or man-made.



Mining slowdown will help lower rates
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