Deteriorating economic conditions and collapsing consumer confidence will push the Reserve Bank of Australia (RBA) off the interest rate fence, with a cut in the already record-low cash rate possible after the federal election, says leading mortgage aggregator Finsure Group.
Finsure Managing Director John Kolenda said while the RBA has kept official rates at the all-time low of 1.5 per cent since August, 2016, the pressure is on to reduce rates again and the central bank has room to move.
“There is not a single shred of positive economic news at the moment,” Mr Kolenda said.
“This is increasing pressure on the RBA to lower rates, particularly when you weigh up all the negative factors which includes the coming federal election, the response to the final report of the Hayne Royal Commission, the falling property market and external matters such as the US-China trade war and Brexit.
“There are just too many headwinds at the moment. You also have banks increasing their rates independently of the RBA due to cost of funding issues. Consumer confidence is the strongest economic indicator and as we can see from downturns in retail spending, consumer confidence is lagging.”
Mr Kolenda said the timing of the next RBA move will hinge on the federal poll, which must be held by May this year.
“I don’t think they would cut rates during an election campaign,” he said.
“If it does happen it would most likely be in the third quarter unless there is a material change in the overall economy.”
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