Powered by MOMENTUM MEDIA
subscribe to our newsletter
Federal budget to delay rate cut: HSBC

Federal budget to delay rate cut: HSBC

The federal government’s decision to deliver its budget early is likely to deter the Reserve Bank from cutting the cash rate until mid-2016, according to HSBC.

Paul Bloxham, HSBC’s chief economist for Australia and New Zealand, said the RBA is expected to keep rates on hold at 2 per cent at today’s meeting, and is unlikely to cut in May, June or July.

Mr Bloxham said the Turnbull government’s decision to move the budget forward to 3 May could delay the RBA cutting rates.

“The central bank is unlikely to consider cutting while the government is delivering its budget,” he said.

If Prime Minister Malcolm Turnbull calls an early election on 2 July, this could reduce the likelihood of further rate cuts in June or July.

“In short, irrespective of the economic numbers, a Q2 cut is looking less likely than previously for tactical reasons associated with politics,” Mr Bloxham said.

“Saying this, a weak enough set of economic indicators would mean the RBA would cut anyway, despite the possible political implications.”

HSBC now expects a rate cut in mid-2016.

Meanwhile, Griffith University finance professor Mark Brimble said the RBA is likely to opt for August to cut the official cash rate.

“The majority of indicators are weakening. The Reserve Bank has room to move on rates and the economy needs the support, both the actual and the psychological,” he said.

Bank of Sydney’s deputy CEO, Steven Pambris, also expects an August rate cut, while AMP Capital chief economist Shane Oliver said a May cut is most likely.

[Related: Further cash rate cut on the horizon, says broker head]

Federal budget to delay rate cut: HSBC
mortgagebusiness

Latest News

Introducing regulatory transcriptions on the application of default interest would “impede the flexibility” that “needs to be exercise...

A newly merged financial services entity has announced the appointment of Commonwealth Bank’s current general manager of business product ...

The prudential regulator has announced that its “enforcement strategy and infrastructure” will be reviewed by its recently appointed sec...

FROM THE WEB
podcast

LATEST PODCAST: How bank ‘simplification’ is aiding the non-bank sector

Is enough being done to ensure responsible lending?