Turnbull as PM, falling dollar to guide RBA decision

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Australia’s official cash interest rate is tipped to remain at 2% following this afternoon’s board meeting of the Reserve Bank of Australia.

All 31 experts surveyed by online financial comparison portal Finder in their monthly RBA survey believe the cash rate will remain the same, and more than 90% of the respondents believe it will remain unchanged for the rest of 2015.

While a change to the cash rate this year is unexpected, 2016 may be a different story, with 60% of respondents believing a rate rise will occur next year.

According to many of those surveyed, the falling Australian dollar and Malcolm Turnbull’s move into the Prime Minister’s office will be the guiding forces at today’s board meeting.

“Leadership change resulting in Malcolm Turnbull becoming Australia's new Prime Minister has been well received by the electorate and financial markets generally,” Peter Boehm from onthehouse.com.au said.

“With improved economic and financial management high on his agenda the market needs time to digest the impacts of any policy initiatives he may introduce,” Boehm said.

Linda Janice Phillips from property valuations firm Propell agreed with Boehm.

“The Australian Dollar is holding at around US71c, a level that the Reserve Bank is comfortable with, though the volatility is high, reflecting global events,” Janice Phillips said

“The change in the federal government leadership to Turnbull has been welcomed by markets and business, and the Reserve Bank is likely to wait and see if this improves confidence, spending, and the economy,” she said.

The majority of those surveyed also think the Australian dollar is far from the end of its slide, with 72% of respondents believing it will not hit its lowest point until sometime in 2016.

“It’s daunting to think just last year, in July 2014, the Australian dollar was buying almost US$0.95 and we were trading at parity with the United States from June 2012 to May 2013,” Finder money expert Michelle Hutchinson said.

“Fast forward to September 2015, and an overwhelming majority – 86 percent – of experts in our latest survey predict the Aussie dollar will fall to US$0.70 by the end of this calendar year, with over two in five believing it will plummet further – to US$0.65 – by year’s end,” Hutchinson said. 

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