ANZ economists say they expect interest rates to be cut another further 50 basis points next year to a new record low of 1.5 per cent.
The unemployment rate refuses to move down and the global ecomy isn’t improving either and it has led ANZ economists to make statements that they think we’ll see more cuts to the cash rate.
Warren Hogan from the ANZ told The Age that more interest rate cuts would be needed to get the economy back on its feet post-resources boom.
“We now expect the RBA to cut the cash rate by a further 50 basis points next year, taking the cash rate to 1.50 per cent,” he said.
“Pinpointing the timing of the cuts is tricky, but we are pencilling in 25 basis point cuts in February and May at this stage.”
The calls from ANZ come as a small surprise, seeing as earlier they had forecast the RBA to stop any more rate cuts for the rest of this year and the entire 2016.
The change in predictions come off the back of downgraded growth forecasts for the world economy from the ANZ, with concern about China a particular focus.
Mr Hogan said the weak economic conditions would make it hard for unemployment to improve and it would force RBA governor Glenn Stevens to seriously consider rate cuts.
“The economic backdrop points to greater risk that unemployment worsens rather than improves over the next 12-24 months,” he said.
“Governor Stevens’ ‘path of least regret’ suggests he will need to cut rates again.”