RBA under growing pressure to drop rates

by Julia Corderoy08 Oct 2015
The Reserve Bank of Australia is under growing pressure to lower the cash rate after the International Monetary Fund (IMF) downgraded its global economic outlook, despite keeping it on hold at 2% this month.

According to leading financial advisory and investment group Cigna Wealth, the global economic slowdown, particularly in China, is a big concern for Australia and is the main reason why the RBA may decide to drop official rates from 2% before the end of the year.

Cigna Wealth’s managing director Kent Leicester says the recent report by the IMF – which downgraded Australia’s growth forecast to 2.4% in 2015 and forecast diminishing growth for commodity exporters such as Australia – highlights the need for lower interest rates.

“There is a growing view from economists that further rate cuts will be needed to drive the Australian dollar even lower to boost exports and to encourage international tourism and stimulate jobs growth,” he said.

“Although lower interest rates are not good news for some investors, they have helped borrowers and bolstered consumer confidence during challenging economic times.”

According to Leicester, a recent online survey by Cigna Wealth found 60% of respondents expected the RBA to lower rates again this year after it made cuts of 25 basis points in both February and May.

“The RBA still has more room to move than most other central banks around the world,” Leicester said.