RBA cut on the cards for tomorrow, and three more likely

by Adam Smith04 Jun 2012

A further RBA rate cut is widely tipped for tomorrow, on the heels of disappointing retail figures, falling house prices and continued woes in Europe.

A Bloomberg poll has found nearly half of economists expect the Reserve Bank to cut another 25bps from the cash rate when it meets tomorrow. The prediction comes as retail sales figures disappointed last week, with ABS data showing sales fell 0.2% in April.

Westpac chief economist Bill Evans has predicted that the Reserve will not only cut rates tomorrow, but will follow with successive cuts in July and August, and a final cut late in the year to bring the cash rate to 2.75%. Evans said the bank had revised its previous forecast of a 3.25% cash rate by year's end.

"These two extra cuts are based on our assessment that the global environment – read Europe – has deteriorated even further since we revised down our call for the low point from 3.75% to 3.25%. In
turn this deterioration is expected to have a more severe impact on confidence in Australia than had earlier been expected," Evans said.

Should the Reserve cut rates tomorrow, RateCity spokesperson Michelle Hutchison has predicted that many lenders will again fail to pass on the full rate cut.

Most lenders in RateCity’s database have now passed on some of the Reserve Bank’s 50bp rate cut last month; However, we found only three lenders that passed on the full 50bps to some of their home loans – Defence Bank, Unicredit WA and Macarthur Credit Union. The average variable rate drop out of those lenders that have cut their rates was 32bps, which means lenders have kept on average 18bps of the RBA rate cut," she said.


  • by Trevor 4/06/2012 11:29:43 AM

    Why the hype about RBA rate changes? Lending Int rates are NOT directly connected to RBA....