Cash rate cut on cards, but when?

by Julia Corderoy04 May 2015
Changing economic conditions have left experts torn on whether the Reserve Bank will lower the cash rate tomorrow.

According to the latest Reserve Bank conducted by finder.com.au, just over half (53%) of the 34 economists and analysts surveyed are expecting the cash rate to remain on hold on Tuesday, including NAB, while 47% experts are expecting the cash rate to fall, including CBA and Westpac.

The majority of those surveyed (62%) are forecasting at least one cash rate cut by the end of the year, with most expecting the cut to occur between July and September. However, six economists surveyed (18%) are expecting the cash rate to fall next week as well as another cut this year, including leading AMP economist Shane Oliver.

Michelle Hutchison, money expert at finder.com.au, said that changing conditions have caused uncertainty of when the cash rate will next move.

“While the majority of experts in the Survey still expect a rate cut to happen this year, they’re divided as to when this will occur.

“Of those who expect the cash rate to hold next week, many have pointed to improved employment figures and the need to wait until the federal budget is released on May 12 before another rate cut. For those experts who are forecasting a cut next week, the high Australian dollar, modest economic growth and lower Consumer Price Index figures were recurring reasons to provide more stimulus.

“Several experts were concerned about the impact of another rate cut on the property market, as property prices are expected to rise as a result. This means it’s going to be even tougher for first home buyers, who are at record lows.”

According to the survey, 82% said they expect property prices to continue rising this year, including analysts from CBA and NAB. Almost one in three (30%) are expecting fewer first home buyers to enter the market this year compared to 2014, while 45% are expecting the same level as last year.
 

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