Global challenges could mean lower interest rates: Kolenda

In particular, Mr Kolenda said the slowdown in China and the rest of Asia remains the big concern for the RBA and a strong argument for cutting rates next month and into 2016.

“There are other reasons for the RBA to reduce the cash rate from its current record low of 2.0 per cent in the months ahead,” he said.

“Mortgage holders have already seen their interest rates go up in recent times as the major banks and other lenders have been increasing variable interest rates from 15 to 49 basis points due to additional compliance and provisioning costs.

“The Sydney and Melbourne property markets – the only cause for concern domestically for the RBA to consider actually lifting its cash rate – are slowing and are now no longer a reason to keep rates on hold.”

Mr Kolenda said continued falls for the Australian dollar, weak commodity prices and subdued consumer confidence and business investment would also weigh on the RBA as it ponders lowering the cash rate for the first time since May.

“Of course, if the RBA does reduce its cash rate going forward, it remains to be seen how much of the RBA’s rate reduction is passed on by lenders,” he said.

Mr Kolenda said the RBA’s future cash rate decisions could be negated by the banks adhering to APRA’s regulatory requirements that will increase the cost of providing mortgages and make them the strongest in the world.

“Further rate relief from the central bank may also not be passed on in full by lenders, and we may see increases in rates across the board due to potentially increased funding costs and pressure on the major banks to meet the APRA requirements by mid-2016.”