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."

 

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