Interest rates look set to remain steady


Home loan borrowers can put their hopes on hold for short-term rate cuts as the struggling jobs market continues to hold the economy back.

Unemployment is expected to rise to around 6.25 per cent in 2014.

The jobless rate is often a lagging indicator of economic conditions, with some of the more positive economic data occurring right now we may see an improvement in unemployment in the second half of 2014. 

The housing market has been improving, retail spending is slowly climbing, as is consumer confidence. 

The Australian dollar has also fallen below the 90US cents mark and may slide further, with the RBA officially stating it would rather see this than further interest rates cuts. 

NAB chief economist Alan Oster told The Adviser he wasn’t expecting a rate change for at least a few months. 

“We changed our prediction for a cut from February 2014 to June 2014 back in October last year,” he said. 

“We’re staying with June because we’re sure it’ll take the RBA a while to convince themselves to do something.” 

“The RBA kept sending signals that they are comfortable where they are, and that they’re going to wait to see what’s happening.” 

“I think the issue is still non-mining investment and whether it comes back – and I think that will take a little bit of time – but we’re seeing retail numbers get some traction so it may be sooner than expected.” 

AMP chief economist told The Adviser, however, he didn’t think interest rates will change until at least September. 

“We have seen housing pick up quite solidly, retail figures are now looking pretty good, and while confidence levels are not fantastic, they are now off their lows,” he said. 

“All of those things suggest the Reserve Bank will leave rates on hold when they meet in February, and probably keep rates on hold for many months to come.”


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