The Reserve Bank of Australia (RBA) is unlikely to deliver a hat-trick of interest rate cuts when its board meets next week, according to a survey by leading mortgage broker Priority Lending
Priority Lending Corporate Spokesman Paul Smith said a survey of the company’s mortgage brokers found 79 per cent believe the RBA will keep the cash rate at 3.5 per cent after announcing reductions in May and June.
Mr Smith said only 19 per cent of the 239 broker respondents thought the central bank could lower the official rate by 25 basis points while two per cent tipped a 50 basis points reduction. No one forecast a cut of one per cent or higher.
“Mortgage holders will always be happy to see rates come down but this time it looks most likely that the RBA will be staying on the sidelines after back-to-back monthly reductions,” he said.
“The two interest rate cuts have yet to have a substantial impact on the housing and retail sectors but with other economic indicators such as inflation and unemployment, within targeted ranges, it appears the RBA is poised to leave rates unchanged.
“Consumer sentiment remains murky and difficult to project due to the European debt crisis and direction of the Australian economy. Many consumers will likely hold back spending until some resolutions appear both internationally and domestically.”
Mr Smith said the impact of the carbon tax from July 1 may also be weighing on consumers.
He said a Priority Lending consumer survey this week also found more support for another rate cut, particularly among Generation Y respondents.
“Many younger home buyers will find it necessary to offset the steadily rising costs of living with lower interest rates,” he said.
“If the RBA keeps its powder dry on Tuesday, it will still be under pressure to lower rates in the months ahead and will be well armed to combat further economic slowdown in various sectors.”
Should the central bank lower rates again next week, it will be the first time the RBA has applied three consecutive monthly rate cuts since the height of the global financial crisis in November, 2008.
Survey Results:
What movement do you expect from the RBA on July 3?
a) No movement – 79%
b) Decrease 25 bps – 19%
c) Decrease 50 bps – 2%
d) Increase 25 bps or more – 0%
Source: Priority Lending
