18 Dec 2019
RBA decision making in 2020
Presented by Chris Lioutas - PSK's Chief Investment Officer
The RBA Cash Rate currently sits at 0.75% following three cuts this year. The rate cuts were a function of a weakening local economy with economic growth and inflation both falling off the back of weak consumption / retail sales, weak business investment, and not enough coming through on the government investment / expenditure front to make up for the other areas of weakness. The slowdown in construction housing also contributed to weak consumption and a weaker labour market.
Unfortunately, much of the same economic backdrop looks likely for next year, with a continuation of weak retail sales and weak labour market. Whilst we have seen early signs of a housing market recovery, particularly in Sydney and Melbourne, from a price perspective, it will take some time (1.5-2 years) before these price movements translate into new construction and demand for labour.
As such, absent significant government fiscal stimulus, the RBA will be forced to lower rates further, most likely to their preferred lower-bound of 0.25%. At present, the consensus is for a cut in February (their first meeting of 2020), and another one closer to the Government’s May budget. If that were to transpire, then the RBA will have quantitative easing (QE) / money printing ready to go for the 2nd half of the year.
If you’d like to discuss any of the points raised, please do not hesitate to contact us on 9324 8888.
PSK Financial Services Group Pty Ltd (ABN 24 134 987 205) are Authorised Representatives of Charter Financial Planning Ltd (AFSL 234666), Australian Financial services Licensee and Australian Credit Licensee. Information contained in this article is general in nature. It does not take into account your objectives, needs or financial situation. You need to consider your financial situation before making any decisions based on this information.