Could global pressures cause a rate cut?

by Julia Corderoy06 Jul 2015
Worsening financial troubles in Greece and other parts of the world could cause the official cash rate to fall this year, according to a survey of leading economists.

The latest monthly Reserve Bank Survey, conducted by, found that all 33 experts and economists on the panel unanimously expect the cash rate will remain on hold tomorrow, Tuesday 7 July.
Many of the analysts surveyed suspects the Reserve Bank will maintain a ‘wait and see’ approach as the recent rate cut in May has had little impact on the economy. The improved unemployment rate, higher housing costs as well as financial pressures from overseas were other factors associated with the Reserve Bank’s expected decision for a rate pause.
However, almost two out of five of the experts surveyed (38%) are expecting the cash rate to fall by the end of the year, and could start dropping as early as next month.

Out of the 12 who expect the cash rate will fall this year, five are expecting a drop in August or September while the remaining seven are expecting to see the cash rate fall in the last quarter of 2015.

Just two (6%) are expecting the cash rate to rise this year. The majority (56% or 18 panellists) are expecting the cash rate to start rising next year, while 13 analysts believe the cash rate will increase after 2016. The average forecast for when the cash rate will rise is the last quarter of 2016.

Almost four out of five analysts (79% or 26 experts) believe house prices will continue to rise this year, while one expects house prices may start to fall.

“The Reserve Bank is in between a rock and a hard place on this now with a weak economy and property prices starting to bubble in some areas.  Ideally it needs the currency to do the work for it, but this is remaining stubbornly strong,” Mark Brimble, associate professor of finance at Griffith University said.

“This continued uncertainty in Europe and Asia and expectations of a rate rise in the US later this calendar year, the Reserve Bank is likely to sit on its hands. Regarding house prices, the property market will continue to behave unevenly across the country. Some areas will continue to rise, while others will fall dramatically as employment (and thus demand) shifts.”