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Brokers expect at least one more RBA rate cut

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Reporter 6 minute read

A new survey of brokers has revealed a unanimous view that the Reserve Bank will cut the official cash rate at least once more this year.

The vast majority of brokers on HashChing’s monthly survey (96 per cent), believe that the Reserve Bank of Australia (RBA) will cut the official cash rate at least once more in 2019, with the remaining 4 per cent expecting the cash rate to remain stagnant at 1.25 per cent. 

Nearly one in three brokers who responded to the survey, or 32 per cent, expect the cash rate to be cut further when the July rate decision is made today (2 July), while 68 per cent expect no movement. 

Commenting on the finding, Hashching’s recently appointed interim CEO, Arun Maharaj, said: “It’s worth noting that with most tipping a further reduction in interest rates, it could point to the fact that economic conditions more broadly are still reasonably sluggish.”

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Nearly half of the brokers that were polled (48 per cent), believe that there is “definitely more interest and energy in the market now than this time last year”, while 20 per cent believe there is less interest and energy, and 32 per cent believe there has been “no real change”. 

Meanwhile, a separate survey of finance industry representatives by Finder found that 68 per cent of respondents expect the cash rate to be lowered further in July. 

While RBA governor Dr Philip Lowe has expressed reluctance towards cutting the cash rate to a “dangerous” low, he has previously said that further reductions are “more likely than not”.

In a panel discussion hosted by the ANU Crawford Australia Leadership Forum, Dr Lowe said: “If everyone’s easing, the effect that we get from exchange rate depreciation [isn’t there], so we don’t get the same stimulus that you would normally expect from monetary easing.

“It may be possible if you ease more than others, but that’s quite a dangerous path to go down.”

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The RBA governor added: “There are limits on what further monetary policy can achieve.”

AMP Capital chief economist Shane Oliver has said he believes the cash rate will be decreased further in July because the June rate cut “has not been enough for the RBA to achieve its objective of lowering unemployment, boosting wages growth and pushing inflation back to target”. 

David Roberton, head of economic and market research at Bendigo and Adelaide Bank, held a similar view, as did ME’s general manager of markets, John Caelli. 

On the other hand, Peter Haller, treasurer at Heritage Bank, expects the RBA to keep the cash rate on hold in July and drop it in August instead.

“The RBA has emphasised the importance of spare capacity in the labour market in recent weeks. However, the monthly volatility in labour market data means they will wait one more month before cutting the cash rate in August,” he said.

[Related: Credit resurgence could have ‘undesirable’ impact]

Brokers expect at least one more RBA rate cut
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