Will the RBA make a move?

Thursday 02 May 2013

Article by Mozo

All eyes will return to the Reserve Bank of Australia (RBA) on Tuesday when it makes its May interest rate decision, while those with home loans will be cheering for a rate cut, any cuts could have an impact on the Aussie dollar's exchange rate.

Home Loans and Interest Rates in Australia

The RBA have been playing a waiting game in 2013, choosing to keep the current rate of 3 percent on hold while watching the impact of last years rate cuts taking hold, monitoring inflation and any other signals to where the Australian economy is heading. The outlook from economists is that economic conditions are currently soft at best, giving the RBA good reason to trim interest rates down to around 2.75 percent, reports NineMSN.

If rates are cut, this would probably have a knock on effect of weakening the Aussie dollar as demand overseas for the AUD slows down. While this would be a positive for exporters, those with overseas manufacturing costs and import costs will not be so jubilant.

Paul Gambles, managing partner at advisory firm MBMG International, recently speculated his expectations that the Australian dollar will fall as much as 40 percent against the U.S. dollar in the next 18 months, from the U.S. $1.03 seen at the beginning of the week down to as low as U.S. 60 cents.

However, with kick starting the local property market currently a priority, to fill in the void from the slow down in the mining boom, lower borrowing costs brought on by interest rate cuts would be a benefit to building supply companies such as Boral and Brickworks, as well as mortgage holders.

While it's not quite possible to determine exactly what the RBA's decision will be, a recent Bloomberg survey found that the average outlook among econmistst is for a median interest rate of 2.75 percent for 2013 and 3.25 percent through 2014.

Whatever the Reserve Bank's decision may be on Tuesday, savvy Australians will be searching for the markets best home loan interest rates on Mozo.

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