What will happen to interest rates in 2018?
Well we know what will happen when the RBA meets for the last time this year – there will be no change.
But what’s ahead?
Comparison website RateCity’s analysis of 24 economic indicators has revealed a still-sluggish economy with no imminent signs of improvement.
You’ll find their infographic below insightful
In my mind the official RBA interest rate is likely to remain at 1.5% throughout 2018.
Australia’s economy is still operating below its potential, with economic growth not strong enough to justify an interest rate increase.
The positive signs of jobs creation, falling unemployment and rises in full-time employment are being offset by slow wages growth, sluggish retail sales and a benign inflationary environment.
Fortunately, the RBA will be pleased our property markets are cooling and will not feel the need to use rising rates to slow the market.
If there was any doubt, the usually reserved RBA governor Philip Lowe spelt it out in a recent speech saying, “there is not a strong case for a near-term adjustment in monetary policy”.
RateCity money editor Sally Tindall said the household debt-to-income ratio, which is at a record high of 193.7 per cent, was weighing heavily on the RBA’s mind.
“Property prices might be softening, but a large number of Australians are carrying unreasonable levels of debt.
“We need to see some genuine growth in wages before households become robust enough to withstand a rate hike.
“Right now, it’s hard the see how people are getting ahead.
“While we won’t see a rate hike in the short term, if inflation starts to grow in the first half of next year, we may see a tightening of monetary policy before 2018 is out,”
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