Westpac’s Bill Evans has become the first economist from one of the big four banks to predict the Reserve Bank of Australia will resume official interest rate cuts in 2015. This could be good news for home owners with further reductions in their home loan repayments.
Mr Evans, who was almost alone in anticipating the start of the Reserve Bank’s rate cutting cycle in 2011, has scrapped a forecast that the next move would be a hike.
Softness in the domestic economy – which was underscored by weak national accounts on Wednesday – mean the Reserve Bank will now do two “insurance cuts” in February and March next year. Rate hikes won’t happen until 2016.
“On reflection we think that the weakness in the accounts – including falling inflation; contracting national incomes; and a loss in growth momentum – coupled with further sharp falls in commodity prices, continued weakness in consumer sentiment – which has failed to recover from its post-budget fall – and the prospect of a further significant negative shock to confidence will be enough to prompt the RBA to use some of their remaining policy ‘scope’ and lower rates further.”
Mr Evans follows recent moves to predict cuts by Deutsche Bank, Credit Suisse and Goldman Sachs.