Invest
Is Australia set for quantitative easing?
Experts predict that the Reserve Bank of Australia will take unconventional measures to fire up the economy, despite the governor stating in a speech last week that it’s “highly unlikely”.
Is Australia set for quantitative easing?
Experts predict that the Reserve Bank of Australia will take unconventional measures to fire up the economy, despite the governor stating in a speech last week that it’s “highly unlikely”.
RBA governor Philip Lowe insisted that the federal bank had “no appetite” for quantitative easing (QE), a process where the central bank creates new cash to decrease – or ease – the cost of borrowing.
But nearly half (46 per cent) of experts disagree with the governor, stating QE will be needed in 2020.
Graham Cooke, insights manager at Finder, said QE will be on the cards if the rate cuts continue to be ineffective beyond the housing market.
“The RBA said they may look to alternative stimulus methods once the rate hits 0.25 per cent.
“We’re only two cuts away from that, and the three cuts of 2019 have failed to stimulate anything beyond the housing market,” Mr Cooke said.
Nearly two-thirds of surveyed economists believe the first of the two rate cuts is coming in February 2020.
Nerida Conisbee of REA Group said, “We have had three cuts in quick succession, and so far the economic response has been muted. At this stage, it is likely that rates will be cut in February. However, it will depend on data coming out over summer.”
Bill Evans, chief economist at Westpac, expects that the cash rate will be 0.25 per cent by June 2020.
Aside from QE, experts were asked to weigh in on the likelihood of a number of scenarios affecting the Australian economy.
On the bright side, a recession looks increasingly unlikely in 2020, with 89 per cent of experts not expecting an economic decline and 88 per cent thinking it unlikely that house prices will fall.
Three-quarters of experts surveyed (76 per cent) don’t foresee a significant rise in mortgage defaults, 64 per cent think a US-China trade deal is likely and 52 per cent say it is likely that house prices will fully recover.
Mr Cooke said the positive outlook on China is significant because the fate of the US-China trade deal was cited as economists’ number one economic concern in the August survey this year.
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