The end is in sight for record low interest rates but don’t expect a change to the cash rate at the first Reserve Bank board meeting of 2016 on Tuesday (2 February) according to experts surveyed by comparison website finder.com.au.
All 29 experts and economists in the finder.com.au Reserve Bank Survey, the biggest of its kind in Australia, expect the cash rate to remain on hold. The cash rate has been at 2% since May 2015.
One in three (34%) expect a rate rise in 2016, with more than half (52% predicting a rate rise next year. Just 24 percent of experts predict the cash rate will drop this year, and if a rate cut is coming it will be by June.
The only Hunter based survey participant was Greater Building Society CEO Scott Morgan, who said the RBA doesn’t have enough ammunition to warrant a change.
“The economic data doesn’t support a change at this stage,” Scott said. “I can’t see a cut given some of the commentary from the RBA in recent months.”
“Any change up or down will be influenced by changes in business and consumer confidence, the work Government and business does to undertake reforms that boost economic performance, and global economic changes.”
Other leading economists agreed.
Garry Shilson-Josling, Australian Associated Press: “Unemployment is drifting down, the Aussie dollar is 35 US cents lower than it was three years ago and the cash rate is already at a record low. The argument for further cuts right now is wafer-thin. Thinner, in fact.”
Saul Eslake, Economist: “Nothing has happened since the last meeting to warrant a change in monetary policy settings. The fall in the exchange rate since early December is a sufficient response to the deterioration in global financial market sentiment.”
Noel Whittaker, QUT and Fairfax columnist: “The world is full of uncertainty, but our employment figures have been optimistic.”
Shane Oliver from AMP Capital thinks the RBA should ease because the risks to growth are on the downside and inflation is very low.
“I think that given the emerging softening in the housing cycle, the ongoing mining downturn and renewed global market turmoil the RBA should ease again,” Shane said. “But I don’t think it’s convinced just yet.”
The survey was conducted in the week ending 22 January 2016.