Cut rates or risk recession, says Oliver
By
Adam Smith
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26/09/2011 3:30:00 AM
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The Reserve Bank has been warned that Australia could enter a recession without a cut in the official cash rate.
AMP chief economist Shane Oliver has told News Ltd the RBA would "fall behind the curve" unless it cut the official cash rate to 4.50% at its October meeting.
"Interest rates have to come down or we risk getting into a downward spiral where falling confidence leads to reduced spending, which leads to higher unemployment. It's now starting to happen," Oliver told News Ltd.
Oliver urged the Reserve Bank to cut rates by 25bps at its October meeting, but warned that another week of global economic turmoil could necessitate deeper cuts.
"If we got through another week like last we need to cut by 50bps," Oliver commented.
Oliver told Australian BrokerNews in August that rates were likely to stay on hold barring a "complete meltdown" of the global economy. He commented that "panic" in the market could lead to 100bps of RBA cuts.
Related stories:
'Panic' could bring major rate cuts
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Jobless figures could trigger rate cut
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