RBA more likely to cut rates, says aggregator head

by Julia Corderoy04 Dec 2014
The Reserve Bank is more likely to cut rates next year rather than increase them, says one mortgage industry pundit.

John Kolenda, managing director of 1300HomeLoans, says economic conditions will need to improve “considerably” before any rate hikes, however the central bank may have scope to move downwards.

“I'm sure we'll see official rates kept at the current level for the foreseeable future with the possibility of the RBA taking its cash rate down if the domestic economy continues to under-perform,” he said.

“The RBA still has plenty of room to play with and if unemployment remains high and consumer and business sentiment subdued going into the New Year then we may see further easing.”

Kolenda isn’t the only one who believes a rate cut might be on the cards. A growing number of economists have changed their tune and expect the central bank may further ease rates in the coming year due to sluggish GDP, weak global demand and crashing commodity prices.

In the latest monthly Reserve Bank survey conducted by finder.com.au, 8% of economists and industry experts (3 out of 37) surveyed are forecasting the next cash rate move to be a decrease – an interesting shift from last month when only one respondent predicted another cash rate cut.

Global asset manager AllianceBernstein's chief economist Guy Bruten says housing investment is one of the only things driving business investment and consumer confidence – and this market is starting to cool. 

"The risks for the Australian economy are tilting to the downside, in our view, and, far from increasing interest rates, there's a growing prospect that the RBA may well need to cut them again,” Fairfax quotes Bruten.

Deutsche Bank chief economist Adam Boyton says we may see the RBA cut the cash rate to 2% next year.

“It's just that combination of some early signs of cooling in house price growth, weaker commodity prices over the past few months, combined with our expectation that the unemployment rate will rise to close to seven per cent next year,” News Ltd quotes Boyton.

“All of those things mean that on balance, we think rate cuts next year are more likely than not.”

In the statement of monetary policy decision, Reserve Bank governor Glenn Stevens said the Australian dollar remains above estimates of its fundamental value, particularly given the significant declines in key commodity prices. 

“A lower exchange rate is likely to be needed to achieve balanced growth in the economy,” he said before announcing the “most prudent course” will be a stability in interest rates.



  • by Andrew 4/12/2014 7:45:43 AM

    Only trouble is if rates are cut any more my money comes out of the bank and if lots of other people have the same idea then there will be chaos.

  • by Ed Ridge 4/12/2014 9:26:34 AM

    Wow Andrew that is one llllloooonnnngggg stretch to get to that situation.

  • by Andrew 5/12/2014 9:25:18 AM

    NO Ed its just one more interest rate cut, I'm not in this world to pay off other peoples home loans especially since their homes have risen so much in value.