Stephen Koukoulas suggests urgent rate cut needed as mining jobs go: Tweet of the day
Were the RBA holding its monthly monetary policy meeting today rather than last week, it would have cut the cash rate, Business Spectator columnist and former Gillard government economist Stephen “The Kouk” Koukoulas has tweeted today.
This tweet was preceded by:
His contention that a more monetary stimulus is needed follows mining giants BHP Billiton and Xstrata announcing around 900 employees will lose their jobs, with BHP saying it will close its Gregory coking coal mine in Queensland on October 10, coming soon after its decision not to proceed with its Olympic Dam expansion project near Roxby Downs in South Australia.
Apart from the loss of mining, jobs, housing finance data for July released today shows that mortgage lending slumped 1% despite rate cuts in May and June – though economists still expect some bounce.
Koukoulas, along with the other 23 economics polled by Bloomberg a week before the September cash rate decision, were unanimous (and correct) in tipping rates to remain on hold – but he was one of only three economists to tip a rate cut in October in the same poll.
The other economists raising their heads above the parapet were AMP Capital Investors chief economist Shane Oliver and the Australian arm of French bank BNP Paribas’s senior Asia economist Dominic Bryant.
Shane Oliver himself tweeted today about the need for a rate cut:
The same three are again swimming against the tide in the latest September 7 Bloomberg survey – with the other 21 out of 24 economists polled tipping a rate hold when the Reserve Bank next meets on October 2.
In his September 6 “Insights” update Oliver said that in order to boost growth and guard against a slump, the RBA was likely to cut rates to 2.75% in the next six months.
“The bottom line is that interest rates are still too high and will need to fall further.
“The standard variable mortgage rate at 6.8% is just below its long-term average of 7.25%, but normally rates need to fall well below their long-term average to be con?dent of stronger growth.
“In an environment of household and business caution since the global ?nancial crisis, the neutral rate has likely fallen, probably to around 6.75% which would suggest that current mortgage rate levels are not stimulatory at all.”