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Uptick in local equities on the horizon

While the RBA’s aggressive tactics with the cash rate could be bullish for the economy and local equities, one economist believes there is a risk of further inflating the Melbourne and Sydney property markets.

The RBA left rates on hold at 1.75 per cent this month, following a cut in May. The likelihood of further cuts in the second half of the year opens the equities market to a potential boost.

"[The RBA] left the door open for further rate cuts given it has forecast and expressed concern over a possible sustained sub-2 per cent underlying inflation rate over the next year or so," said chief economist at BetaShares David Bassanese.

"The RBA now appears to be targeting a lift in wage inflation, from current levels of just over 2 per cent, which in turn requires a lower unemployment rate and above-trend economic growth.

"If the RBA succeeds, it could be bullish for the economy and local equities, even at the risk of further inflating Sydney and Melbourne property markets."

 

Uptick in local equities on the horizon
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