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Ben Kingsley Blog post by Ben Kingsley

RBA Rates Decision – September 2011

The RBA have again left interest rates on hold, after much speculation mid last month around the cash rate being reduced to stimulate the wider economy as it’s believed to be slowing over the past few months.

In a recent speech, the Deputy Governor, Mr Ric Battellino, gave his indication that recent global economic uncertainty and the subsequent volatility within the equity markets around the world hadn’t flowed through into the data the RBA uses to interpret the current situation here in Australia and as such it was too early to call a rate cut just yet.

Most commentators are now unsure whether the next rate movement is up or down, so the common consensus is that rates will remain on hold until the events offshore play themselves out.  If Europe falters under its big debt burden, then the flow on effect will be global and Australia will also be caught up in the mess.

If Europe and America can manage their way through this difficult period and get their economies moving forward then a rate cut here is less likely, but it is fair to say that our economy is going through an adjustment period as our high dollar makes us less competitive within our manufacturing sector.

So for the record, what should you be keeping an eye on that will play out the next interest rate call:

  • Inflation (CPI)
  • Consumer Sentiment
  • Consumer Spending
  • Employment
  • European Debt Crisis
  • American Debt Crisis
  • Aussie Dollar
  • Gross Domestic Product (GDP)

As you can see, there are lots of ‘moving parts’ the RBA needs to consider in deciding their next move on rates.  Put simply, in my view, if our economy falters, we are going to see rates reduce, if we ride out this current uncertain wave, and maintain our forward moving economy, and then rates are going to head higher.  But as I’ve maintained since the start of this year, rates will not go further than another 50% basis points if they go up at all, in the next 2 years, based on just how much impact higher rates have on the mortgage belt.

 

(Those people reading this should be reminded this is an opinion comment by Ben Kingsley, and should not be used when making decision about financial matters without seeking further clarification and understanding of your own personal circumstances.  This article is not advice you should rely upon.  I recommend you speak to one of our licensed finance advisors regarding any decision around your personal finances, before taking any action.)

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