Invest
RBA tipped to keep interest rates low until the end of 2022
Economists are predicting interest rates will remain low for a few years, as the RBA prepares to make its first cash rate announcement of the year on Tuesday.
RBA tipped to keep interest rates low until the end of 2022
Economists are predicting interest rates will remain low for a few years, as the RBA prepares to make its first cash rate announcement of the year on Tuesday.
Shane Oliver, chief economist at AMP Capital, expects the Reserve Bank of Australia to keep rates on hold at a record low 0.1 of a percentage point at its first rate meeting of 2021.
According to Mr Oliver, this decision will leave mortgage rates at record lows, which, along with government home buyer incentives and economic recovery, will continue to push average property prices higher.
“Headline inflation will rise due to base effects as the collapse in petrol prices and childcare costs drops out of annual comparisons, but underlying inflation will remain low at around 1.5 per cent or less out to next year.
“This in turn will see the RBA leave rates at 0.1 per cent probably out to end 2022 at least,” Mr Oliver said.
Similarly, CreditorWatch foresees an equal scenario.
According to Harley Dale, chief economist at CreditorWatch, with the RBA using up its ammunition late in 2020, the focus this year will be firmly on federal and state fiscal policy to complement super-low borrowing rates and keep the Australian economic recovery on track.
“In terms of all the policies that the RBA has in place, the Central Bank will be closely keeping an eye on early 2021 economic updates for key sectors such as retail,” Mr Dale said.
“In his National Press Club address yesterday, the Prime Minister reinforced and outlined a raft of policies, including tax cuts for small and medium-sized enterprises (SMEs). Such policies are in play against a backdrop of metrics – such as Australia’s unemployment rate – being in much better shape than many feared through much of last year,” he opined.
Mr Dale further added that the SME sector will be a key barometer of Australia’s economic recovery in 2021.
“CreditorWatch data from a range of industries will continue to provide crucial updates as to how the business and economic landscape for SMEs is faring in the lead-up to, and necessary conclusion of, the JobKeeper program,” he concluded.
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