Discussion in 'Property Market Economics' started by MTR, 12th Jan, 2020.
Will we see a cut???
Stronger Aussie dollar increases chance of February rate cut
Nope, the RBA will wait and see how the bushfire recovery spend impacts the economy.
Unlikely I think now, but the major economists in Australia still believe a rate cut is around the corner. The fact that the dollar has been rising suggests that the market doesn’t think a rate cut is coming now (or the odds have fallen).
Data appears to be turning now and the moves made in 2019 are beginning to translate into activity.
Construction lead indicators show a big spike in approvals, retail performed strongly last quarter, job market appears stable now. I assume there’ll be some negative factors to consider too (bushfires, tourism, dollar, etc).
Interest cost could end being less than maintenance,rates , insurance and taxes if it drops a little bit more !
Hoping the upside of the bush fire crisis is lots of construction activity to rebuild.
That’s a given. I have friends in recruitment that are already starting the planning for the huge increase in labor.
A lot of jobs are going to come out of the fires. Some temporary but quiet a lot of permanent work as well now.
Not too sure of the overall impact of bushfires - perhaps there's a significant negative GDP impact that needs to be factored in that may sway rate decisions. From previous meeting notes, its clear they're open to cutting rates and will likely have that discussion in Feb.
Re bushfires, I think most of it will be a supply side shock, inflationary potentially -- but some of these items are usually weeded out in RBA measurements (differences in inflation measures). I suspect, given the productivity of the land that was caught up in the national disaster (largely bushland, regions, etc), the economic impact may be a bit too small to adjust Australia-wide macro measurements all that much. Some individual prices of some items that experience supply shocks may have some large inflation (not sure what, but weather in Northern QLD impact banana prices in the past for example).
I am not sure that the IR cut is really off the table at this stage. I think it is baked in the cake to some extent, and if they don't follow through in Feb, they risk inverting the yield curve.
I agree we don't need a cut, but that hasn't stopped the RBA before.
Nah RBA folks too busy on their hawaiian holidays, wont be back in time till their kids summer holidays are over. Not enough time to analyse data to do rate cut at least till march
Re Bushfires, a lot of agricultural land and equipment has also been destroyed. Food prices would surely increase due to supply and demand.
I’ve heard that a lot of plantation timber has been destroyed which I think will impact the building industry in the next 6 months. Leading to increased building costs. Any thoughts?
Market already baked in Interest rate cut plus QE, get on with the program
a QE just sent stock market to the moon like the US QE
Feb rate cut is almost sure with another rate cut in 3-4 months
QE will start by RBA purchasing residential mortgage backed securities will equate to 2 cuts another 2-3 years no rate increase
ndpjai,would you have any data or links on what the RBA intend to follow ,as i can't find anything on the above..
As 2-3 years with zero interest rate rise over that period myself i don't think the RBA is prepared to take the risk about the unknown ,and if the rates do go like Japan which also has a bigger pay=out ratio across a bigger spectrum of opportunity then the ASX will the place to be as everyone runs away from the bank sfa fixed terms rates..
Myself i think the rates will never go too zero,and we have seen the last of the low rates..
Shouldnt really, well maybe some native timber flooring might get more expensive , but timber imports will probably just increase, pretty sure those wil be cheaper than local stuff.
Markets are pricing a 50% chance of rate cut at Feb meeting
Various data points say RBA minutes, swaps markets, jobs growth, construction, wage growth, sentiment, trade indicators, spending etc. etc. and use the algorithms that i have developed to understand and predict the future rate using AI & machine learning techniques.
As of now, i'm waiting for december jobs growth, if its minimal then 100% sure 25 basis cut in Feb.
ndpjai--Thanks for that...
The ASX RBA Rate Indicator provides a market monitor for Official Cash Rate expectations in Australia based on potential RBA interest rate changes.
As at 21 January, the ASX 30 Day Interbank Cash Rate Futures February 2020 contract was trading at 99.365, indicating a 53% expectation of an interest rate decrease to 0.50% at the next RBA Board meeting.
The table below highlights how market expectations of an interest rate decrease at the next RBA Board meeting has evolved in recent days.
Trading Day | No Change | Decrease to 0.50%
10 January 58% 42%
13 January 53% 47%
14 January 53% 47%
15 January 49% 51%
16 January 44% 56%
17 January 44% 56%
20 January 44% 56%
21 January 47% 53%
Today's employment print wasn't too bad and seems like the expectation of a rate cut is now pushed further down the road
Trading Day | No Change | Decrease to 0.50%
23 January 72% 28%
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