Admire Rakti or Fawkner, but no RBA Cup Day movement: Westpac's Bill Evans

Flemington isn't the only location with a important meet scheduled for Tuesday 4 November; The Reserve Bank Board will also assemble to discuss any potential movements in the official cash rate.

While November has been a remarkably popular month for the bank to move rates, Westpac's Bill Evans says there is no chance of a November move.

Westpac expect the statement to repeat key phrases: “the exchange rate... remains high by historical standards”; and “the most prudent course is likely to be a period of stability in interest rates”.

Evans recalls that in the first six years of RBA Governor Glenn Stevens’ tenure (2006-2011), November proved to be a month of moving interest rates. In 2012 the Bank was certainly ‘in play’ with moves occurring in both October and December while, arguably, the Bank was also ‘in play’ in November last year.

On recent house price inflation, Evans suggests the recent slowing from its late-2013 pace might be easing the bank's concerns around the property market.

"There is still likely to be some RBA/APRA package of initiatives announced before year’s end but, given the authorities do not appear to be inclined towards ‘heavy handed’ actions and the flexibility of Australia’s financial system, particularly around an active non-bank sector, it seems unlikely that these moves will have a marked effect on the availability of credit overall," he advised.

Westpac is expecting 50 basic points of hikes in the latter half of 2015 and a further 100 basic points in 2016.

"Back in March we were quite out of step with the economics community.

"We did not expect the RBA to begin hiking until August 2015, whereas 60% of forecasters expected rate hikes by the March quarter and 15% expected rate cuts.

"All those rate hawks have been forced to revise their views.

"The latest survey indicates that 85% of economics forecasters are still predicting higher rates by end 2015 (with 50% expecting hikes to begin in the June quarter – but expect that proportion to dwindle by year’s end). Only 15% (four forecasters) are pushing the market’s line.

"Unusually we find ourselves buried in the economists’ consensus."

Bill Evans, the chief economist also delved into The Melbourne Cup.

"Some will be aware that we have picked the winner of the Melbourne Cup in two of the last three years," he said.

"This year we are reasonably confident that we can find yet another winner in Admire Rakti.

"This Japanese horse ran by far the best trial for the race with its storming win in the most reliable lead up race for the Cup – the Caulfield Cup.

"Arguably, Japan produces the best stayers in the world – even ahead of their Irish counterparts.

"Who can forget the last time Japanese horses ran in the Cup?

"That was in 2006 when the Japanese horse Delta Blues beat his Japanese compatriot Pop Rock by the narrowest margin (just half a head) with a massive four and a half lengths to the next horse.

"However, Admire Rakti has other history going against him. He is likely to be around 5:1 odds on the day. That will make him favourite.

"No favourite has won the race since Makybe Diva in 2005 and no horse has won the Caulfield Cup/Melbourne Cup double since Ethereal in 2001.

"He will also have to carry 58.5 kilos (top weight) – average weight of the winner in the last decade has been 54 kilos. No horse has won with such a weight since the 1970s.

"There are also unofficial reports that the horse is not considered to be in the top 20 horses in Japan.

"Other contenders are: Protectionist (the German champion) and Lucia Valentina (beaten favourite behind Admire Rakti in the Caulfield Cup).

"The English ‘raiders’ headed by Red Cadeaux look to be an ordinary lot this year.

"In fact the clear danger from my perspective is Fawkner, surprisingly an Australian horse, who ran a mighty 2nd in our other key lead up race – the W S Cox Plate (Fiorente, last year’s winner ran third last year).

"As always, the usual disclaimers apply – “this does not constitute investment advice ... etc etc” (see pages 12-13 for more).

"But good luck and at least be consoled by the fact that your study will not be disturbed by any surprises out of the Reserve Bank which announces its decision 30 minutes before the big event!"