Half surveyed experts think RBA went wrong with rate cuts: Finder Survey

Half surveyed experts think RBA went wrong with rate cuts: Finder Survey
Staff reporterDecember 7, 2020

Economists are highly divided on whether the Reserve Bank of Australia (RBA) made the right number of cuts to the cash rate last year, according to the latest Finder survey.

In this month’s Finder RBA Cash Rate Survey, when asked if the RBA was right to make 3 cuts in 2019, only half of the respondents to this question said it made the right call (50%,13/26).

Of the other half of experts who disagreed with the Reserve Bank's decisions, most (42%, 11/26) said the RBA should have cut less.

Graham Cooke, insights manager at Finder, said the RBA’s decisions will never please everybody.

“On the one hand, some experts say the cutting was 'overzealous' and is seeing house prices soar while most economic metrics have been stagnant."

“Others think the RBA hasn’t done enough to repair the economy in light of lagging employment and inflation figures."

“One thing is clear: three cuts have reignited the housing market and pumped up property prices across the country."

“With more cuts on the horizon, it remains to be seen whether cheaper credit and lower rates will be an elixir or a poison pill," he said."

RBA cash rate expected to hold

Nearly 9 in 10 experts and economists predict the RBA will hold the cash rate in February (87%, 34/39) with just 13% expecting a cut.

The experts predicting a cut cited the bushfires, weak wage growth, low inflation and high unemployment as the main issues necessitating an easing.

Besa Deda of St.George Economics said; “In the absence of wage pressures, inflation remains well below target. More stimulus is required to return growth to trend.”

Cooke noted the forecast for a rate cut in February dropped from 66% before the December meeting to just 13% this month.

Nearly 4 out of 5 who made a forward prediction (not including February) forecast a cash rate drop by May 2020 (79%, 23/29).

A quarter of experts predict a cut in March (24%, 7/29), while nearly a third predict a cut in April (31%, 9/29). Another quarter predict a cut in May (24%, 7/29).

Only 2 of the 39 experts (5%) on the panel thought the eventual move, whenever it happens, would be a rise.

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