Interest rates could fall again

Monday 23 July 2012

Article by Mozo

A lot of experts believe that further interest rate cuts in the next few months are highly unlikely, as the Australian economy is performing well.

However, new figures released by the Australian Bureau of Statistics have suggested that the price of imported goods has started to rise again, which could prompt the Reserve Bank of Australia (RBA) to make another rate reduction.

Producer prices rose by 0.5 per cent in the second quarter of 2012 when compared to the first three months of the year, which was higher than most economists had been expecting.

The RBA trimmed the national cash rate to 3.5 per cent in June and board members hinted earlier this month that more cuts were unlikely in the short-term.

But, the organisation still has room to manoeuvre and may be tempted to reduce the cash rate further based on the new statistics.

Such a move would be warmly received by Aussies who have taken out personal loans, as monthly repayments would be lowered and it could also encourage more people to loosen the grip on their finances.

Leaders at Deloitte Access Economics believe there is potential for another rate cut, but it all depends on developments in other parts of the world.

Speaking to Bloomberg, the organisation stated that one more reduction could be on the cards if China manages to maintain its growth outlook. Events in Europe will also have a bearing on the RBA's decision.

"Provided neither generates worse news than already expected – an admittedly key caveat – then we'd stick to the view we've had for a while: that the overall outlook for Australian growth is still looking rather better than most people realise," a Deloitte spokesperson was quoted as saying.

The Australian Associated Press recently reported that uptake of personal loans was up by 0.4 per cent in seasonally-adjusted terms across the country in May and this could turn out to be a longer term trend if the RBA slashes rates further.

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Interest rates could fall again

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