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RBA rate cuts are on the cards, according to billionaire developer

With consumer confidence still shaky due to doubts over the current government, an impending carbon tax, concerns as to the state of the global economy and the recent share market crisis, many commentators are suggesting it’s just a matter of time before the Reserve Bank starts dropping interest rates once more.

One property player who is certain that the central bank will need to alter the course of their monetary policy from keeping a lid on inflation led by the resources sector, to stimulating the Australian economy by lowering the official interest rate, is billionaire apartment developer Harry Triguboff.

Speaking with The Australian, the 78-year-old founder and managing director of Meriton Apartments believes the RBA will move to lower rates very soon, but hopes this about face won’t be temporary. 

“We must ensure that the Reserve Bank doesn’t just drop them and then raise them again,” Mr Triguboff said.

“What happens is, as you drop them, people start buying, then you raise them and people can’t pay.”

Mr Triguboff says more people will start to enter the housing market once more due to the turmoil and uncertainty surrounding shares, particularly in a lower interest rate environment. However he cautions that a preemptive rise by the RBA would do more harm than good, unless it came on the back of a significant boost to the economy.

He predicts that the Australian dollar will fall in line with an interest rate drop, thereby encouraging more Chinese buyers back into the market, and says attempting to stimulate the economy with initiatives such as the First Home Buyer’s Grant should be more of a permanent strategy by the government.

“If they are going to say only if you buy in half a year, this is nonsense. You have got to give people confidence, not to make them run around here and there,” he said.

With the RBA meeting on Tuesday it will be interesting to see how they handle interest rates. No one expects them to raise rates. In fact commentators mixed between rates remaining steady and a rate fall.

What do I think will happen to interest rates?

If rates don’t fall in September, they are likely to in October and again a few times over the next year or so as the RBA attempts to stimulate our economy.

But then over the next few years rates are likely to rise again as inflation increases. It seems that we are bound to enter an inflationary period, with our resources boom fuelling the economy, the Australian dollar dropping (which imports inflation) and America trying to work its way out of it’s recession through inflation



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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