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How low can the RBA go?

By Cameron Micallef · July 18 2019
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Invest

How low can the RBA go?

By Cameron Micallef
July 18 2019
Reading:
egg
egg
RBA

How low can the RBA go?

author image
By Cameron Micallef · July 18 2019
Reading:
egg
egg
RBA

The RBA has revealed the factors behind the second rate cuts in as many months and has left the door open to further changes in the near future.

The Reserve Bank beat its previous record low this month, by taking off 25 basis points, leaving the official cash rate at 1.00 per cent.

In its minutes released on Tuesday, the governing body said that the labour market and low consumer spending were the two factors that are holding the economy back. 

“Although there had been a modest pick-up in wages growth in the private sector, wages growth had remained low overall. In combination, these factors suggested that spare capacity was likely to remain in the labour market for some time,” said RBA governor Philip Lowe. 

Mr Lowe said higher growth in disposable income was expected to support consumption but that outlook was uncertain, despite the short term growth thanks to the tax offset.

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Economists predict further cuts

Sean Langcake, senior economist at BIS Oxford Economics, believes the wage data being released by the Australian Bureau of Statistics will lead to further rate cuts by the end of the year. 

This is the first read on the labour market we have received since the RBA cut rates,” he said. 

“They will be looking for further employment growth in the coming months, and for the unemployment and underemployment rates to come down, ultimately encouraging wage growth. We expect the RBA board to cut rates at least once more this year, taking the cash rate to 0.75 per cent by year end,” said Mr Langcake.

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How low can the RBA go?
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About the author

Cameron is a journalist for Momentum Media's nestegg. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leveraging their insights to grow your portfolio.

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About the author

Cameron is a journalist for Momentum Media's nestegg. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leveraging their insights to grow your portfolio.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

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