Experts say the cash rate will stay on hold

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According to finder.com.au’s latest Reserve Bank Survey, economists and experts are forecasting that the Reserve Bank of Australia (RBA) will leave the official cash rate untouched on August 1.

These experts were asked to shed light on the direction of the next rate shift, and the majority (87%) think the next rate move will be in a positive direction. Only four experts (13%) expect the next rate move to be another cut.

Neither do the panellists agree with the forecast of John Edwards, a former RBA board member, who said in June that interest rates may have to increase more than two percentage points over the next 24 months.  

The majority of panellists surveyed on this topic (69%) expect three or fewer hikes over the next 24 months, while one in four (23%) expect four hikes over the same period. Just one economist – John Caelli of ME Bank – agrees with Edwards that eight hikes may take place over the next 24 months.

The panellists were also asked to identify their greatest economic concerns for Australia right now. The two highest ranked concerns were household debt and wage growth, cited by six experts each.

Other concerns raise among the panellists were the unemployment rate, the future of China’s economy, and a lack of entrepreneurial innovation in Australia.

Here’s what some of these experts had to say:

Jordan Eliseo, chief economist at ABC Bullion

“The RBA has made it clear it thinks that it has the appropriate monetary policy settings in place. None of the data that we’ve seen come out this month (on inflation, business confidence, employment etc.) will have meaningfully impacted that view. As such, notwithstanding their renewed concern regarding the strength of the AUD, we think they will keep rates on hold when they meet.”

Shane Oliver, chief economist at AMP Capital

“While growth was weaker than expected in the March quarter, recent data suggests its back on track, reducing pressure to cut rates again but risks around the consumer, weak inflation and a rebound in the [Australian dollar] indicate it’s way too early to hike rates.”

Richard Robinson, senior economist at BIS Shrapnel 

“Although RBA would like to cut rates to take upward pressure off the [Australia dollar], it can’t cut rates as it fears re-stoking the residential property market. With inflation low and particularly wages growth very low, there is no need to raise rates for at least 2 years.”

Saul Eslake, economist at Corinna Economic Advisory

“The RBA would clearly prefer not to have to cut rates any further, but is also in no hurry to start raising them (even if central banks elsewhere in the world do). Economic data since the last board meeting (more good data on employment, business conditions, offset by another quarter of very low inflation, softness in household spending) don’t present a strong case to move in either direction.”

Michael Yardney, CEO at Metropole Property Strategists

“The RBA can't raise rates as it would stifle our fragile economy and would lead to a higher [Australian dollar]. Similarly, it can’t lower rates as this would fuel the Sydney and Melbourne property markets.”

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