Four reasons why the RBA may have an easing bias: Pete Wargent

A short but sweet statement on monetary policy on Tuesday from the Reserve Bank confirmed that interest rates remain on hold at 2.50% as expected.

The wording of the statement is not strong, but you'd still have to think that the next movement in interest rates is likely to be downwards for a number of reasons.

Firstly, mining capital expenditure is forecast to fall significantly over the coming years.

Secondly, Monday's indicative inflation gauge showed that inflation remains benign.

Thirdly, Tuesday's retail figures were weak again, showing an increase of only 0.1% for the month of July, which was below market expectations.

The trend estimate for retail sales looks to be very weak, although we retain hope that this will pick up over the coming year with the housing market recovery becoming ever more established with each passing month.

Fourthly, and finally, the indicators are pointing towards a weak GDP print tomorrow. Westpac is sticking with its forecast of 0.6% growth for the quarter, but there would appear to be a number of downside risks to that view.

Naturally, the RBA will continue to be wary of triggering a housing bubble in the second hand property market, but price growth looks to be mainly a Sydney story at the moment.


Pete Wargent is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.

His new book 'Four Green Houses and a Red Hotel' was released on 1 September 2013.

Pete Wargent

Pete Wargent

Pete Wargent is the co-founder of BuyersBuyers.com.au, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.

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