AMP’s Shane Oliver the lone economist out of 25 tipping the RBA to cut rates next week: Bloomberg

Twenty four out of twenty five economists polled by Bloomberg expect the RBA to leave the cash rate on hold in June when it meets on Tuesday (June 4).

AMP Capital Investors chief economist Shane Oliver is the only economist who expects the cash rate to fall to a new low of 2.5%.

Last week Oliver and Westpac’s Bill Evans were the only two economists polled who tipped a rate cut in June.

Evans has returned to market consensus, arguing that financial market and real economy developments since the May 7 meeting, when the cash rate was cut by 25 basis points to 2.75%, “have, on net, not been supportive of an immediate follow-up move”.

“As a consequence, we now anticipate that the next move is likely to be delivered in August,”he says.

Oliver says he expects another 25 basis point rate cut next week, but admits that it's "another close call as the RBA may decide that having cut in May and with the fall in the Australian dollar it will wait and assess for now”.

“Against this though, the Australian dollar hasn't really fallen enough to provide a big stimulus to the economy (it’s just at the low end of the range its been in for two years), the latest business investment readings confirm that mining investment has peaked and that non-mining investment is likely to remain weak, readings for business and consumer confidence have been poor, forward looking jobs indicators are soft and the toughish Budget and Ford's decision to quit manufacturing seem to have added to the sense of gloom surrounding the Australian economy. 

“As a result, with low inflation providing plenty of scope to ease the RBA should act again on its easing bias and on balance we think that it will,” he adds. 

HSBC Australian and New Zealand chief economist Paul Bloxham expects a rate hold in June with his principle argument being the 6% weakening of the Australian dollar against the US dollar since the RBA cut the cash rate on May 7. 

He says the recent depreciation of the dollar has had the effect of adding to 0.1% to Australia’s GDP – “which is around the same as the estimated effect of a 25 basis point rate cut”. 

The odds of a rate cut rise in the third quarter of the year with 10 out of 25 economists favouring a downward move by the RBA.