Login
ISCOVER
Jessica Darnbrough
A majority of brokers expect the Reserve Bank to cut rates sooner rather than later.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
According to The Adviser’s latest weekly straw poll, 70.4 per cent of brokers expect the next move for the cash rate will be down.
Of the 476 respondents, just 29.6 per cent feel the next cash rate move will be up.
The results mirror the predictions of Westpac’s chief economist Bill Evans.
Last week, Mr Evans shocked the market by forecasting a series of interest rate cuts.
Mr Evans said low consumer sentiment could force the Reserve Bank of Australia to slash the official cash rate by up to 1 per cent in 2012.
“We were all talking not long ago that rates could go up, but if the consumer remains subdued there may be interest rate reductions and if that occurs that would be a very strong stimulus for the consumer to save less and spend a little bit more,” he said.
Mr Evan’s comments were echoed by Reserve Bank governor Glenn Stevens, who has changed his tone from bullish to cautious.
According to the minutes of the latest Board meeting, Mr Stevens said while the “mildly restrictive” monetary policy remained appropriate for the time being, the Board would continue to “assess carefully the evolving outlook for growth and inflation”.
“Growth in credit to households has slowed. Most asset prices, including housing prices, have also softened over recent months,” the minutes read.
But while the Reserve Bank’s next rate movement remains unknown, Empire’s chief executive officer Chris Gray told The Adviser that any downwards rate movement would inevitably create a raft of business opportunities for brokers.
“If they do drop rates half a percent in the next six months, it will be good for the property industry. It won’t cause property prices to fly through the roof again, instead it will take activity back to more normal levels,” he said.
“While I can’t predict what the RBA will do, I can say that consumers will be happier if rates go down. And I think the Reserve Bank may look to do something based on people’s emotions, rather than strict economics.”
