RBA - Wespac tip two interest rate cuts in 2019

6401.0 - Consumer Price Index, Australia, Mar 2019
0.0% inflation for the quarter and 1.3% annually. Australia seems to be stuck in a vicious circle of low inflation and low wage growth. Inflation has now been stuck below the RBA's 2-3 per cent target band for three years. If unemployment starts rising it's only a matter of time before there is a rate cut or two!

 

How can the bank survive in satisfying the stakeholder & share price if they keep on cutting the IR down?
mass lay off and more outsourced & automation

 

Do you actually think any bank cares about sacking workers? They are a business and will do whatever suits them.

 

Australia's Commonwealth Bank plans to sack 10,000 staff, shut 300 branches: Report

 

You may find that the 10,000 figure is not all that unreasonable, given the Bank’s already announced plans.

The planned divestments of Wealth and Insurance will account for about 5,000 direct staff and indirect head office support staff. Although the plans for Advice, Super and Mortgage Broking were shelved, it will be revisited at some stage. Bear in mind all these people have a job, just working for new owners so there’s no net loss to the economy. If anything, more staff are needed as a divestment is usually a diseconomy of scale transaction.

From there, it’s not unreasonable to assume 5,000 from a remaining workforce of 45,000 might find themselves automated or otherwise not needed, especially in a low to negative growth environment.

 

I noticed Westpac just increased the variable portion on our offset loan from 5.54% to 5.64% this month I assume in anticipation of rate cuts.

Its only a small variable amount of $75k with full offset and we only carry about $50k in this loan (I locked in the majority of it years ago at 3.99%) but still sticks in my craw that they are charging this much.

I have the cash to transfer the entire amount from the USA to Australia and pay it off to zero but at the moment im making more in USA equities than I would get paying this off......but there is going to come a time Westpac where I totally pay you out and you get zero interest from me because of you being so greedy.

 

If you are making more money in USA then just keep growing this? Just my thoughts. Or have a bet each way, bring some home but not all

 

They also increased interest rates by .25% across most of their credit cards a couple of days ago.

 

i can't believe people don't pay off their credit cards in full! it's the most silly thing to do next to payday lenders.

 

Westpac caps off bad profit season for the major banks

"The proportion of borrowers at least 30 days behind on their home loan has risen from 1.4 per cent in September to 1.59 per cent at the end of March.

The share of Westpac home loan customers more than 90 days behind has risen more sharply from 0.72 to 0.82 per cent".

 

Bill Evans commentary following RBA outcome:

RBA holds rates steady in line with Westpac's forecast

 

The most recent RBA Statement on Monetary Policy was released today.

The have updated their economic forecasts:

• Downgraded GDP growth forecast of 2.6% for 2019 and 2.7% for 2020. (vs 3.0% and 2.7% forecast in the last quarter's Statement)
• Reduced underlying inflation forecasts of 1.75% for 2019 and 2.0% for 2020. (vs 2.0% and 2.25% prior forecast)
• Unemployment rate forecast slightly increased

As Bill Evans at Westpac has noted, "It is very important to note that these forecasts are based on market pricing for the profile for the RBA cash rate and the current spot AUD. In February, markets had one cut priced-in for February 2020, whereas in May, one full cut is priced-in for August 2019 and a second priced-in for May 2020. The AUD trade weighted index is 2% lower than in February."

So even with their economic modeling already embedding the assumption of 2 rate cuts priced in by the market, the GDP, inflation and unemployment forecasts were still downgraded.

So what the RBA Statement is basically telling us, is that things could even get worse if they did not follow the market expectations of at least 2 rate cuts!!!

I think they only avoided cutting in May because of the elections!!!

 

Spot on this....I believe we are in zero wage growth economy. Which is why if labor gets in and cut neg gearing they are actually going to cause artificial rent acceleration in property. They should let the market sort things out.

As for people saying the $A is going to free fall...I think they are incorrect. There is inflation in OZ just in living costs but not wages. So essentially labor unit cost is getting cheaper but prices on most items are still creeping up. Most people in Australia are far too stupid to realize this....it is actually the policy of the libs....places like Sydney and Melbourne are going to feel this more as the wages growth here has been the most!

 

This article has gone out on Bloomberg over in the states today
Bloomberg - Are you a robot?

 

Labour market has worsened which is what the RBA hinted they were waiting for. Pretty good chance of a rate cut in June now.

 

An interesting take on why the RBA is not rushing to cut rates
https://www.smh.com.au/business/the...is-stalling-on-rate-cuts-20190515-p51nog.html

 

NAB now tipping 3 cuts, or 2 and some other stimulus...

Interest rate to drop below 1 per cent, Big Four bank predicts - realestate.com.au

 

Maybe just a true indication on how poor our economy is really performing.
These massive piles of debt that many are sitting on is really starting to affect the entire economy.

 

It was all good until the royal commision/7.25 assessment rate

 

Westpac Chief Economist Bill Evans has updated his rate cut forecasts:

"On February 21 Westpac forecast that the Reserve Bank would cut the cash rate by 50 basis points in two tranches – August and November. Since then markets and forecasters have largely moved in that direction.

We have not changed that forecast since that date.

However, today, we are announcing an adjustment to the forecast to bring forward the first cut to the June Board meeting with the second cut to follow in August.

We then expect the cash rate to remain on hold through 2020."

Read more: Westpac moves rate profile forward to June and August