Cash rate will hold meanwhile concerns over China-US relations grow

Cash rate will hold meanwhile concerns over China-US relations grow
Cash rate will hold meanwhile concerns over China-US relations grow

The Reserve Bank of Australia (RBA) is set to return to a holding pattern, leaving the cash rate at 1.00%, according to the latest survey data from finder.com.au.

In the latest Finder RBA Cash Rate Survey™ 44 of the 46 experts and economists (96%) predict the board will hold at the August meeting to let the June and July cuts trickle through the economy.

Almost all experts (92%, 38) expect the next cash rate move will be a cut. Nearly half (49%, 21) are predicting a final low of 0.50%, while a third (35%, 15) tip believe it will bottom out at 0.75%.

But the holding pattern may not last long; the most popular months cited for another cash rate cut are November (35%, 17) followed by October (23%, 11).

Graham Cooke, insights manager at Finder, said with the effects of recent cuts still unrealised, the board is hesitant to cut in three consecutive months.

“The jury’s out on the impact of these most recent cuts – it’s simply too soon to tell.

“Economists feel slightly more confident that recent cuts will have a positive effect on the economy once given time to roll out. While positivity is generally still low, housing affordability remains the most positive economic element.” 

Cash rate will hold meanwhile concerns over China-US relations grow

“The falling cash rate combined with falling house prices creates a catch-22 for Aussies looking to break into the property market. Buyers will be wanting to take advantage of historically low rates, but also wanting to purchase at the bottom of the market.”

Despite US rate cut, economists are focused on China
When asked to indicate their two main economic concerns for Australia right now, decisions by the Federal Reserve in the US ranked towards the bottom of the list, being cited by just three economists (5%).

(Note: some responses were submitted just before the first US cash rate cut since 2008, which saw its lending rate fall to 2.25%.)

Instead, (27%, cited by 17 respondents) experts tipped international relations like the fate of US-China Trade Deal and Australian-Chinese trade in general (14%, 9) as massive concerns for the economy, above issues like unemployment, inflation and housing prices.

“What’s happening between China, Australia and the US right now could have far more potential impact on Australia than the Fed Reserve,” Cooke said.

“If the US and China can finally agree on a trade deal, this may result in US imports replacing Australian ones in some Chinese sectors.

“With Australian beef and dairy being particularly strong trade commodities in this space right now, such a deal could be bad for Aussie farmers, and ultimately our economy.”

Peter Boehm of KVB Kunlun said domestic concerns are just part of the equation.

“The impact of international trade negotiations will also play an important role in determining the need or otherwise for another rate adjustment.”

Cash rate will hold meanwhile concerns over China-US relations grow

Results from Finder’s Economic Sentiment Tracker™, which gauges five key indicators – housing affordability, employment, wage growth, cost of living and household debt – show nearly all tipped more positive this month following the second rate cut.

Introduced in March 2018, this month’s tracker set an all-time low for economic sentiment in cost of living (3%).

Tags: 
Rba Rate Decision Trade Policies

Comments

Be the first one to comment on this article
What would you like to say about this project?