‘RBA will cut again’, says economist

A leading Australian economist has predicted that the Reserve Bank of Australia will “reluctantly” cut interest rates next year, due to concern over house prices.

There has been ongoing speculation that the cash rate could rise next year, following on from four months of record-low interest levels (of 1.50 per cent). However, Stephen Koukoulas, former chief economist of Citibank and senior economic adviser to the Australian Prime Minister, told Mortgage Business he believes that there will have to be another cut next year.

Mr Koukoulas commented, “I think the RBA will cut again, reluctantly, because they're worried about house prices, particularly in Sydney and Melbourne [where median house prices are at record highs of $1.06 million and $770,000 respectively]. 

“I think, maybe early in the New Year (if we get another low inflation result at the end of January), if the labour market remains sluggish, the risk reward for the RBA is just to trim rates a little more, which might take a little bit of heat out of the Aussie dollar.” Read More Here