Login
ISCOVER
Economists are divided over whether the Reserve Bank (RBA) will cut the official cash rate tomorrow.
Last week, HSBC chief economist Paul Bloxham said he expected to see the Reserve Bank leave the cash rate on hold, as new data showed the nation’s capital expenditure had fallen by less than expected.
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.
“Mining investment is set to plateau as a share of the economy, not plummet, and non-mining investment is set to rise next year. So, we expect the RBA to be on hold,” he said.
But while Mr Bloxham expects rates to stay on hold, some other experts disagree.
AMP’s chief economist Shane Oliver said he expects to see the cash rate drop to a historic low of 2.5 per cent following the June board meeting.
“It’s another close call, as the RBA may decide that having cut in May and with the fall in the Australian dollar it will wait and assess for now,” he said.
“Against this though, the Australian dollar hasn't really fallen enough to provide a big stimulus to the economy (it’s just at the low end of the range it’s been in for two years). The latest business investment readings confirm that mining investment has peaked and that non-mining investment is likely to remain weak; readings for business and consumer confidence have been poor; forward-looking jobs indicators are soft; and the toughish Budget and Ford's decision to quit manufacturing seem to have added to the sense of gloom surrounding the Australian economy.
“As a result, with low inflation providing plenty of scope to ease, the RBA should act again on its easing bias and, on balance, we think that it will.”
