NAB has revealed it does not expect an interest rate rise until the last quarter of 2015, defying industry predictions the RBA could move as soon as September.
Speaking at a NAB Federal Budget Breakfast in Sydney yesterday, the bank’s global head of research, Peter Jolly, said the bank’s forecasts were that the RBA was unlikely to move on rates for at least the next 12 to 18 months.
Mr Jolly said it would not be Australia’s hot housing market that would be the catalyst for a rise; rather, it would mirror rises by the US Federal Reserve which are not expected until the second half of 2015.
“NAB sees the economy remaining benign for the next few years,” Mr Jolly said, “and that means low inflation, low interest rates and an unemployment rate bobbing around the six per cent mark.”
The good news for the economy was that domestic housing construction was starting to show signs of growth, reversing an almost decade-long decline, Mr Jolly said. He also said the Australian dollar will drop back to 80 US cents as the US Federal Reserve begins to increase rates.
Another guest speaker at the NAB Federal Budget Breakfast was Phil Ruthven, founder and chairman of IBISWorld. Mr Ruthven called Tuesday night’s Budget “rationalistic rather than humanistic”.
Mr Ruthven believed the Budget would be looked upon favourably by foreign investors and that it was tourism – and tourist areas – that should do the economy’s heavy lifting now the mining boom has cooled.
“China now has four million tourists going overseas annually. If Australia can get just 20 per cent of that business then that is easily going to cater for where the mining industry has tapered off,” he said.