Monday 6 February 2012

If the RBA cuts today...

It's only a few hours till we see whether the RBA cuts official interest rates or not.  I hope this post is not the kiss of death to the interest rate cut that is needed to tackle lower inflation and sub-trend growth.  As mentioned, we'll see.

If the RBA does cut 25 basis points, the official cash rate will be set at 4.0%.  This will be significant from a few different angles.

Not least will be the fact that official interest rates* will have NEVER been this low under any of:
  • the Howard Government (March 1996 to November 2007 - low point 4.25%);
  • the Fraser Government (November 1975 to March 1996 - low point 7.65%);
  • the McMahon Government (March 1971 to December 1972- low point 4.30%);
  • and probably the Gorton Government (January 1968 to March 1971 - low point 5.70%).
I say "probably" the Gorton Government because the RBA data base only goes back to July 1969 and at that time the 90 day bank bill yield was 5.80%.

Interest rates will always be lower under ..........

* 90 day bank bill used prior to 1990.

6 comments:

  1. Not being an economist so I can only hazzard a guess and say the levels of spending are down because of the uncertainty as to the rising costs of energy and the unknowns around the carbon tax so perhaps this is seeing the reduced levels of inflation and combined with the growing unemployment level all the RBA can do is reduce rates to offset what the current govnuts are stuffing up

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  2. If the rates do come down, I hope the banks do the right thing for the borrowers. This time...

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  3. Oops, the rates are on hold.

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  4. Indeed! The kiss of death. RBA seems to be too optimistic on mining and still unable to accept that inflation will be low. Oh well. Four weeks till next RBA meeting!

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  5. Kouky likes blowing bubbles just like Greenspan.

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