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After the Reserve Bank of Australia (RBA) cut the official cash rate in August by 25 basis points – taking it to just 2.50 per cent – brokers said we have now reached the bottom of the rate cycle.
In an online straw poll conducted by The Adviser, more than 65 per cent of brokers said the cash rate cycle had reached its bottom.
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According to NAB’s interest rate forecast, however, we may see rates drop again before the end of the year. As The Adviser went to press, NAB was predicting the cash rate will be steady in September, but will drop to 2.25 per cent by December.
“We now also expect an additional 25 basis point cut to 2.25 per cent before the year end – most likely in November after the third quarter CPI, although it could be earlier,” said NAB chief economist Alan Oster.
“Beyond this, we expect the Australian economy will continue to grow below trend, income growth to be weak, and the unemployment rate to rise to, and possibly above, 6.25 per cent.
“So the RBA will retain a bias to ease well into 2014 and a cash rate below 2.25 per cent remains a real possibility.”
