Powered by MOMENTUM MEDIA
subscribe to our newsletter

RBA likely to cut rates in 2017: AB

Australia’s economic growth is showing signs of improvement, but the adjustment in house prices may drive further cuts throughout 2017, according to AllianceBernstein.

AllianceBernstein (AB) recently upgraded its outlook for Australian growth, citing improving commodity prices and incoming economic data as drivers of the decision.

“The labour market has generally been doing better than expected, business and consumer sentiment has improved, and the GDP has been running above 3 per cent,” the company said.

Inflation however remains “near or below the bottom end” of RBA targets, AB said, which when coupled with record low wage growth and an appreciating dollar would justify policymakers maintaining an easing bias.

“How much weight to give these two issues - stronger growth and stubbornly low core inflation - represents somewhat of a quandary.

Advertisement
Advertisement

“It seems to us that we’re nearing the point where stronger growth numbers - in concert with housing-influenced financial stability concerns - will convince the central banks to stand pat on interest rates,” AB said.

Nonetheless, AB said its baseline scenario was for further rate cuts in 2017, though these would be “contingent upon how disorderly the housing adjustment becomes”.

“We think there will be enough stress in that sector next year to justify another couple of rate cuts,” the company said.

[Related: Bank educates borrowers amid 'community angst' over rates]

RBA likely to cut rates in 2017: AB

PROMOTED CONTENT


>AllianceBernstein (AB) recently upgraded its outlook for Australian growth, citing improving commodity prices and incoming economic data as drivers of the decision.

“The labour market has generally been doing better than expected, business and consumer sentiment has improved, and the GDP has been running above 3 per cent,” the company said.

Inflation however remains “near or below the bottom end” of RBA targets, AB said, which when coupled with record low wage growth and an appreciating dollar would justify policymakers maintaining an easing bias.

“How much weight to give these two issues - stronger growth and stubbornly low core inflation - represents somewhat of a quandary.

“It seems to us that we’re nearing the point where stronger growth numbers - in concert with housing-influenced financial stability concerns - will convince the central banks to stand pat on interest rates,” AB said.

Nonetheless, AB said its baseline scenario was for further rate cuts in 2017, though these would be “contingent upon how disorderly the housing adjustment becomes”.

“We think there will be enough stress in that sector next year to justify another couple of rate cuts,” the company said.

[Related: Bank educates borrowers amid 'community angst' over rates]

RBA likely to cut rates in 2017: AB
mortgagebusiness

Latest News

The managing director of AMP Bank, Rod Finch, is set to join BOQ in April as its first director of transformation, as the bank continues to...

Dwelling unit commencements have continued to fall but the bright spot has been new private sector houses, figures have shown. ...

Over 75,000 households have applied for a HomeBuilder grant, with the majority of applications relating to the construction of a new home, a...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: A new record in mortgage approvals

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.