Another 0.5% interest rate prediction …

wealth4life,

The lastest job listing figures were just released last week … $20,000 jobs vanished from last quarter.  For this reason it is now unlikely that rates will rise this year … but it is not totally ruled out.  It's a delicate balancing act to not crash the economy but get households to cut their spending to slow an overheated economy … difficult to do when rsiing fuel costs are triggering added inflation.

Always remember that it's a function of supply and demand … migration fugures are still high in many areas.

Hei Maxxi,

The INFLATION RATE will determine the future rate rise.
The unemployment rate is still very low at 4.3%.
Most of the chief economists still predict 1-2 rates rise till end or early next year
I would like to see it go through double digits to cool down the economy and of course property market.
Sydney auction rate has been havouring around 46% over the last months

Cheers

Donald

God,

That's exactly my point …. that's why it's a delicate balance …. short of writing an essay here!!!
The reason it is less likely for rate rises is because fo two reasons ….

1/  If you fix one problem you worsen another …. unemployemnt figures and you can weaken the economy severely,

2/  Interest rates is not the only way to slow the economy.  Tax cuts for example will also achieve this …. and this is exactly what the govt is speaking of. 

Contrary to belief … it is not the intention of the govt to see mass forclosures.

Other issue is will rates still move up a notch even if the RBA does nothing , as it seems that things o/s in the banking sector may still not have settled.

Everytime it starts to look okay, another loss from a major US bank throws another shiver through the markets and tightens liquidity.

maxxi hasnt been back yet to comment,  so far the only thing I can think of is that tax cuts may reduce wage demands therefore help reduce product input costs and contain inflation.   I only ever did economics 101 ,  so would be happy to learn more.

Cutting tax will reduce the interest rates or slow down the economy… Maxxi you must live in la la land…
Which professor of economy teach you about this?

Maybe he was suggesting they may put less pressure on wages, however this will have little effect when you have every other profession like doctors,engineers,teachers ect demanding 10-50% wage increases… and in some cases already governments caving in to these demands, welcome back UNIONS

Interest rates and the economy – property prices 

• Interest rates have been left on hold since March 2008. The immediate inflation figures and outlook is the leading indicator for monetary policy or the regulation of interest rates by the RBA.
• The cash rate is currently 7.25%.
• Economic growth (which drives jobs and demand) is expected to fall from 3.25% to 2.75%.
• Unemployment is tipped to rise from 4.25% to 4.5%. (Reflecting the slowdown in growth).
• Whilst the RBA has lifted its inflation forecasts from 3.5% to 4.5% by December 2008, the medium term outlook is then a fall to 3.5% – which supports claims that the cash rate should fall over 2009. This should see home interest rates fall and some life come back into the property market.
• NAB thinks the cash rate will fall from 7.25% to 6% over 2009.
• Economic forecaster, Peter Switzer states that the above forecast should come to pass so as long as the price of oil does not increase too dramatically. An increase in the price of oil may put further upward pressure on inflation (Goldman Sachs forecast that oil may rise to $US200 a barrel).
• Peter Switzer states that if oil ‘goes sky high’ that we can count on a recession and then interest rates would fall big time to avoid a long drawn out one. A recession is defined as two consecutive quarters of negative GDP growth.
• Despite rises in oil and the flow on inflation effects, the RBA has reduced the odds of a rate rise by the end of the year from 100 per cent to 70 per cent. This is mainly due to the slow in the economy and retail spending.
• The RBA supports Westpac’s statement that the worst is over with regards to the ‘Global Credit Crunch’ and rates should ease in 2009.

There are a few predictions are there. 

yes thanks chris.. So I guess your saying hold on to any variable loans we might have 

MOst of us should be getting at least on.07 to 0.9 or even 1.0 off (for the million dollar borrowers)  standard  variable which is under the fixed rates available. This always makes the decision to fix that much harder because you have to predict more than 2 rate rises consecutively otherwise theres no point fixing. Unfortunatly there has been a shite load in a row. Shall we wait till 2009 and hope for rates to come down then lock in again.   Wish all my loans were 6.75% fixed that one currently is. That would be nice..

Spot on forecast Chris White!!!!