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ISCOVER
Staff Reporter
Australia’s economists are at odds over what the Reserve Bank will do with the official cash rate.
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Earlier this week, AMP chief economist Shane Oliver said he expects to see the Reserve Bank cut the cash rate to 2.75 per cent within six months, starting with a 0.25 per cent cut in October or November.
Mr Oliver said the Board was starting to become concerned about the “slowdown taking place in China” and the sharp falls in commodity prices.
But it seems not all economists agree that additional rate cuts are now imminent.
According to National Australia Bank’s economist Alexandra Knight, the nation’s GDP forecasts are still fairly positive, giving the Reserve Bank little room to move on rates.
“We have left our Australian GDP forecasts broadly unchanged. Fine tuning of the forecasts now sees our 2012 GDP forecasts at 3.4 per cent and 2.8 per cent in 2013,” she said.
“We expect core inflation to remain soft for some time: with core CPI of 2.7 per cent in 2012 and 2.9 per cent in 2013. Rising frictional unemployment is still a potential trigger for an end of year rate cut, but our forecasts imply only a very modest weakening in the labour market.
“Hence we still see the RBA on hold until mid-2013. Thereafter, we see rates lifting a touch given rising mining exports, a strengthening labour market and higher inflation.”
