Offshore asset demand could prompt interest rate cuts

The demand for Australian assets among foreign central banks could eventually result in lower interest rates down under.

Loan customers have benefited from significant rate reductions in recent months and there could be more to come.

JP Morgan economist Ben Jarman told the Australian that Germany's Bundesbank had a "very serious" interest in the dollar.

If other major institutions follow suit, the Australian currency would be well supported, which would give the RBA more scope to make further cuts to interest rates.

This, Mr Jarman remarked, would support the economy in the event of a sudden downturn.

The RBA reduced the official cash rate to 3.5 per cent earlier this month, having already sanctioned a 50-point drop in May.

It had previously lowered the rate by 25 points in November and December 2011, but unfortunately many lenders have failed to pass the cuts on to customers in their entirety.

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