Australia Interest Rate Cut Unlikely Say Economists

A rise in home loan approvals of 1.1% during November makes another cut in interest rates increasingly unlikely, an economist says.

Commonwealth Bank chief economist Michael Blythe said the figures from the Australian Bureau of Statistics (ABS) published on Monday meant the Reserve Bank would not cut the cash rate again during this cycle.

“Interest rate sensitive parts [of the economy] like housing, as we’ve seen today, are moving,” he said.

“You don’t need any more help from that perspective and the sectors that do still need help would benefit more from a lower currency.”

Home mortgage approvals rose to 52,912 in November, compared with 52,321 approvals in October, the ABS said.

Total housing finance by value rose 1.7% in November, seasonally adjusted, to $26.9bn.

Blythe said interest rates were likely to rise from the current record low level of 2.5% in late 2014 as a weakening Australian dollar added to inflationary pressures.

But National Australia Bank senior economist Spiros Papadopoulos said that although the housing market was strengthening, it would not be enough to rebalance the economy as the mining investment boom winds down.

Unemployment would continue to rise, meaning the Reserve Bank of Australia would be unlikely to raise the cash rate this year, he said.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza