RBA likely to leave rates on hold for September

It is expected that the Reserve Bank Australia (RBA) will leave interest rates unchanged on Tuesday keeping the cash rate at 3 per cent for the fifth straight month.

Eighteen economists surveyed by APP agreed that the RBA had finished cutting rates in this cycle, but opinions differed on when and how quickly rates will start moving up.

When the interest rates will start moving up?

Stephen Roberts's chief economist of Nomura Australia expected the first rate hike to come in May 2010 because the RBA would want to make sure that the economy was holding up well in the absence of government cash handouts to support consumer spending, with data containing this information only to be published at the beginning of next year.

Economists at Citigroup and ICAP however, expect the RBA will deliver a 25 basis point interest rate rise in the December quarter of this year. As Australia seems to be faring better than expected in the face of the global recession the debt futures contract market is pointing to a first rate rise coming in November.

At a parliamentary committee meeting in August Governor Glenn Stevens stated that on the basis of the information to hand at present, that this may well turn out to be of the shallower recessions Australia has experienced.

The RBA upgraded its growth forecasts to predict positive economic growth for 2009 & 2010.

Two scenarios for Australian Economy

James McIntyre a CBA economist stated that the RBA would be happy to sit tight this week as it was awaiting some key statistics to indicate a clearer picture of the domestic economy. Mr. McIntyre pointed out that there were two potential scenarios for the Australian economy over the rest of this year.

The first one being that there continues to be encouraging signs from the global economy, such as France & Germany emerging from the recession and the pickup of growth in Asia.

The second scenarios being as Treasury Secretary Kim Henry pointed out being for some form of a second shockwave that could come through.

One can only hope that the more favourable outcome might be the one to emerge.

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Published on August 8-st, 2009 in Home Loans
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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