On Tuesday the RBA announced that the official cash rate would be cut by 0.25% to 2.25%. This was the first movement in 18 months and brings a new historical low.
In his most recent edition of Oliver’s Insights, Dr Shane Oliver gives his view on the future of Australian Interest Rates. Oliver makes the following key points in his article:
- The RBA was right to cut interest rates again. Growth is too low and inflation is benign. Expect the cash rate to fall to 2% in the months ahead.
- Record low borrowing rates, the lower $A and the boost to spending power from lower fuel prices should help boost growth to 3% or just over into next year.
- For investors: bank term deposits offer poor returns; remain wary of the $A; favour Australian over global bonds; and shares, commercial property & infrastructure continue to offer attractive yields.