Invest
Bushfires make February cut likely
The ongoing bushfire crisis is tipped to detract 0.4 per cent from Australia’s GDP, reinforcing the likelihood of a February rate cut, economists have suggested.
Bushfires make February cut likely
The ongoing bushfire crisis is tipped to detract 0.4 per cent from Australia’s GDP, reinforcing the likelihood of a February rate cut, economists have suggested.
The Australian bushfire season has now reportedly destroyed more than 7 million hectares of bushland since September 2019, claimed the lives of 25 people and caused countless damage to wildlife, livestock and communities.
According to UBS economist George Tharenou, it is likely that Aussies will see higher food prices, along with rising insurance premiums, which will headline inflation in the short term.
However, higher inflation is likely to be trimmed out by “core” measures used by the RBA.
“Overall, we think this makes a rate cut from the RBA in February more likely.”
“Indeed, in the RBA’s December minutes they noted they would reassess the economic outlook in February 2020 and had the ability to provide further stimulus to the economy, if required. Hence, we continue to expect the RBA to cut rates by 25 bps in February, ahead of downgrading the economic outlook in the February SOMP,” Mr Tharenou said.
AMP chief economist Dr Shane Oliver also believes a rate cut will happen in February.
“With the bushfires likely to contribute to a flow of weak economic data for the next several months, questioning the RBA’s ‘gentle turning point’ in the economy and resulting in a movement away from the achievement of the RBA’s full employment and inflation goals, the fires have only added to the pressure for more policy stimulus,” Dr Oliver said.
“We remain of the view that the RBA will cut the cash rate to 0.5 per cent in February (with the market probability now up to 53.4 per cent from a low of 36 per cent before Christmas) and to 0.25 per cent probably in March,” he said.
Saxo Bank has also taken this view, with Australian markets strategist Eleanor Creagh expecting that the RBA will further decrease the rate once more in the coming year to 0.25 per cent.
“Raging bushfires, and a now resilient Aussie dollar lifting off support levels, will only add to the ongoing pressure on the RBA, particularly whilst the government continues to sit on the sidelines, leaving the heavy lifting to the central bank,” Ms Creagh said.
“The domestic outlook will continue to place downwards pressure on the currency’s recent rally and bond yields,” she concluded.
About the author
About the author
Cash
Cash remains king for many Australians
Demand for banknotes remains high despite a decline in cash transactions. ...Read more
Cash
Interest rates to rise next year?
Commonwealth Bank has seconded Westpac’s predictions, forecasting that interest rates will rise well ahead of the RBA’s 2024 timeline. ...Read more
Cash
RBA makes latest official cash rate call
The Reserve Bank of Australia has made its May call on the official cash rate, with the economy said to be a long way from the conditions needed to precede a rate rise. ...Read more
Cash
RBA puts chatter of an earlier rate hike to rest
The Reserve Bank of Australia has put to rest chatter among investors that conditions for a higher cash rate could be met as early as next year, reaffirming its stance that the rate is “very likely...Read more
Cash
Australia tipped to go cashless by 2024
Australia is forecast to effectively go cashless in just three years, with three in 10 Aussies admitting that “going cashless would be great for the country”. ...Read more
Cash
Tips to finding a middle ground between equities and term deposits
With record-low interest rates and a volatile sharemarket, mature Australians looking to protect their assets while maintaining their income are being driven to fixed-income products, an industry expe...Read more
Cash
What’s next for paper money?
How many times in the past week have you actually had to pull out your wallet to pay for something? And out of those times, did you actually go to use cash? ...Read more
Cash
Last rate day of the year revealed
The Reserve Bank of Australia has announced its decision on the official interest rate for December, following predictions of a hold. ...Read more
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
How the post-lockdown period will influence property, what the soaring NFT market means, and defining financial wellness
Listen now
Cash
Cash remains king for many Australians
Demand for banknotes remains high despite a decline in cash transactions. ...Read more
Cash
Interest rates to rise next year?
Commonwealth Bank has seconded Westpac’s predictions, forecasting that interest rates will rise well ahead of the RBA’s 2024 timeline. ...Read more
Cash
RBA makes latest official cash rate call
The Reserve Bank of Australia has made its May call on the official cash rate, with the economy said to be a long way from the conditions needed to precede a rate rise. ...Read more
Cash
RBA puts chatter of an earlier rate hike to rest
The Reserve Bank of Australia has put to rest chatter among investors that conditions for a higher cash rate could be met as early as next year, reaffirming its stance that the rate is “very likely...Read more
Cash
Australia tipped to go cashless by 2024
Australia is forecast to effectively go cashless in just three years, with three in 10 Aussies admitting that “going cashless would be great for the country”. ...Read more
Cash
Tips to finding a middle ground between equities and term deposits
With record-low interest rates and a volatile sharemarket, mature Australians looking to protect their assets while maintaining their income are being driven to fixed-income products, an industry expe...Read more
Cash
What’s next for paper money?
How many times in the past week have you actually had to pull out your wallet to pay for something? And out of those times, did you actually go to use cash? ...Read more
Cash
Last rate day of the year revealed
The Reserve Bank of Australia has announced its decision on the official interest rate for December, following predictions of a hold. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
