Interest rates have been left on hold since March 2008. The immediate inflation figures and outlook is the leading indicator for monetary policy or the regulation of interest rates by the RBA.
The cash rate is currently 7.25%.
Economic growth (which drives jobs and demand) is expected to fall from 3.25% to 2.75%.
Unemployment is tipped to rise from 4.25% to 4.5%. (Reflecting the slowdown in growth).
Whilst the RBA has lifted its inflation forecasts from 3.5% to 4.5% by December 2008, the medium term outlook is then a fall to 3.5% - which supports claims that the cash rate should fall over 2009. This should see home interest rates fall and some life come back into the property market.
NAB thinks the cash rate will fall from 7.25% to 6% over 2009.
Interest rates have been left on hold since March 2008. The immediate inflation figures and outlook is the leading indicator for monetary policy or the regulation of interest rates by the RBA.
The cash rate is currently 7.25%.
Economic growth (which drives jobs and demand) is expected to fall from 3.25% to 2.75%.
Unemployment is tipped to rise from 4.25% to 4.5%. (Reflecting the slowdown in growth).
Whilst the RBA has lifted its inflation forecasts from 3.5% to 4.5% by December 2008, the medium term outlook is then a fall to 3.5% - which supports claims that the cash rate should fall over 2009. This should see home interest rates fall and some life come back into the property market.
NAB thinks the cash rate will fall from 7.25% to 6% over 2009.
Economic forecaster, Peter Switzer states that the above forecast should come to pass so as long as the price of oil does not increase too dramatically. An increase in the price of oil may put further upward pressure on inflation (Goldman Sachs forecast that oil may rise to $US200 a barrel).
Peter Switzer states that if oil ‘goes sky high’ that we can count on a recession and then interest rates would fall big time to avoid a long drawn out one. A recession is defined as two consecutive quarters of negative GDP growth.
Despite rises in oil and the flow on inflation effects, the RBA has reduced the odds of a rate rise by the end of the year from 100 per cent to 70 per cent. This is mainly due to the slowdown in the economy and retail spending.
The RBA supports Westpac’s statement that the worst is over with regards to the ‘Global Credit Crunch’ and rates should ease in 2009.
