Finance advice

Rate rise draws nearer

By webmaster

The RBA could be forced to lift rates in June, according to the Melbourne Institute.

Edda Claus, author of the Melbourne Institute Monthly Bulletin of Economic Trends, said the Reserve Bank may look to increase the cash rate next month as a pre-emptive strike to keep a lid on domestic inflation.

But while Ms Claus said the Institute forecasts at least another two rate rises before year’s end, she said it is also mindful of the fact that consumer confidence remains weak and global financial conditions are still problematic.

“We continue to rely on our econometric models and our forecasts are again putting us at odds with others. Two points in particular put us at odds.

“First, while we expect a robust rebound in business investment we do not expect growth rates to be close to historical highs. Second, we have a more moderate outlook for the labour market as we see disturbing developments in the labour market,” she said.

Shane Oliver, chief economist at AMP, said a rate move in June was unlikely.

“Given heightened global uncertainty at present, mixed recent economic data releases in Australia and the likelihood that GDP data in the week ahead will show the Australian economy as having contracted in the March quarter, we think that a June rate hike is unlikely.

“However, a move around August remains likely, providing global uncertainty doesn’t increase.”

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