Industry unanimous in RBA cash rate prediction

A finder.com.au survey of 30 expert panellists has revealed that all surveyed respondents believe that the Reserve Bank of Australia (RBA) will hold the cash rate at 1.50 per cent when it announces its decision later today.

However, 81 per cent of the panellists predict that the next cash rate movement will be up, with 12 panellists expecting the RBA to lift the cash rate by as early as May.

Head of investment strategy and chief economist at AMP Capital Shane Oliver has noted that despite strength in some economic indicators, factors such as low inflation, stunted wage growth, consumer uncertainty and the high exchange rate are likely to prompt the RBA to hold the cash rate. 

“While confidence, jobs and non-mining investment are strong, inflation remains below target, wages growth remains around a record low, uncertainty is high regarding the outlook for consumer spending and the Australian dollar is too strong. As such, it is too early for the RBA to consider raising interest rates,” Mr Oliver said.

Independent property market economist Dr Andrew Wilson agrees and also believes that a reduction in housing market activity will further influence the central bank’s decision to keep the cash rate unchanged.

“The latest data is too benign for rate movement — low inflation, higher dollar, cooling house prices, positive labour market, declining building approvals, lower home investor activity — a mixed bag means wait and watch early days 2018 for [the] RBA,” Mr Wilson said.

Despite predicting a hold decision, managing director of Market Economics Stephen Koukoulas suggested there’s evidence that a rate cut is required.

“[The] RBA continue[s] to miss its inflation target, and despite evidence that a rate cut is needed, it is likely to remain on hold. It will cite an improving global economy as a key reason,” Mr Koukoulas said.

Moreover, professor at Monash University Mark Crosby expects the RBA’s eventual decision to raise the cash rate to be influenced by movements in the global market.

“2018 will be watch and wait for the RBA as they observe movements in overseas rates and ponder timing for a rate rise in Australia,” Mr Crosby said.

[Related: Economic indicators pointing to a rate hold]