With below-trend growth and larger forces at play in the global economy, housing prices are becoming less of a concern for the Reserve Bank, claims Deloitte Access Economics.
In a business outlook note released yesterday, Deloitte said that despite minimal inflation risks, the group is confident interest rates will remain on hold tomorrow.
Inflation risks are minimal, growth is below-trend amid an income squeeze, and housing prices are becoming less of a concern for the RBA,” the report said.
“Yet we see interest rates as still on hold rather than necessarily heading lower,” it said.
“In part, that’s due to the Australian dollar, which has taken a lot of pressure off, in part it is because central banks such as the Reserve Bank worry more about rates being too low than they do about them being too high, and in part it is because cheap global funding means the banks are already cutting rates anyway.”
Deloitte said the RBA will “want to keep some of its powder dry”, or refrain from cutting rates in case Australia’s challenges mount further.
However, Westpac chief economist Bill Evans remains confident of a cash rate cut at tomorrow’s RBA board meeting.
Since the bank changed its stance on December 4 last year, Westpac has consistently argued that the RBA will cut the cash rate by 25 basis points at February's meeting.