Macquarie Bank interest rate report [video]

The Reserve Bank Board met this week and kept official interest rates on hold at 2.0%.

Following rate cuts in February and May, Macquarie’s view is that the RBA will pause for several months to assess the impact of these historically low interest rate settings.

Mixed outlook

The economic outlook remains mixed with consumer confidence reversing its post Budget bounce.

Annual GDP growth remains well below Australia’s long-term trend growth rate, and the Australian dollar depreciation is offering less assistance than normally expected.

However, the past month has also seen unemployment modestly improve and buoyant house prices continue to attract commentary, as does growth in residential building approvals.

Business investment

Recent building approvals data shows non-residential construction is now 20% lower than a year ago, and is an indicator that business investment remains elusive.

Potential for future cut


No doubt the RBA are watching developments in Europe as short-term risks have risen.

Macquarie’s economists now view any future policy action as being dependent on a further decline in our economy.

We forecast there will be one more rate cut this year, probably in November, taking the official cash rate to 1.75%.

The next RBA board meeting will be held on Tuesday 4 August.

Source: Macquarie Bank


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