More relief likely as RBA tipped to cut interest rates

Brett Wortman

HOMEOWNERS could be given a dash of relief early next week, with economists predicting the Reserve Bank will slice interest rates when it meets on Tuesday.

HSBC Bank Australia economy Paul Bloxham is predicting a cut of 25 basis points, bringing Australian interest rates down to 2.5%.

The current cash rate of 2.75% is already at a record low since the last cut was made in May.

In July, when the RBA opted to keep the rate steady, RBA governor Glenn Stevens said there would be "some scope for further easing" on interest rates if the rate of inflation fell.

Mr Bloxham said Australia was not creating enough jobs to keep unemployment levels steady - about 17,500 jobs were created each month for the first half of the year when 25,000 jobs were needed.

With the economy still growing slowly and inflation staying low, Mr Bloxham said the RBA had "room to move".

"While the housing market is lifting, broader measures of consumption, investment and hiring intentions are still lacklustre," he said in a report on Friday.

"The end of the mining investment boom means that growth needs to rebalance towards the non-mining sectors, but rebalancing has been quite gradual so far.

"Low interest rates and a now lower Australian dollar are expected to help support this process in coming quarters."

The RBA may keep interests rates on hold if the Australian dollar falls closer to US85c.

Topics:  economy interest rates mortgage rba

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