AUSTRALIA will encounter an increasingly difficult time over the coming months as the economy battles against the backwash of the global financial crisis, the head of the Commonwealth Bank said yesterday.But Ralph Norris stopped short of agreeing with Gail Kelly, his counterpart at Westpac, that the country would fall into recession this year as a consequence of the worldwide drop-off in economic growth.Speaking a day after Mrs Kelly said a local recession was now unavoidable, Mr Norris, who heads the country's second largest bank by market capitalisation, said his organisation, remained cautious about the short- to medium-term outlook for growth.With more than 70 per cent of the developed world now in recession, the Commonwealth Bank chief executive told a Credit Suisse-organised investment conference in Hong Kong that the current state of play represented the "worst economic performance in our lifetimes".World growth was now forecast to go backwards this year and this would have a direct impact on the Australian economy, which was already slowing and experiencing rising unemployment, Mr Norris said. The effects would be felt across a broad range of the bank's customers, which made the domestic outlook "increasingly difficult".However, he joined both Mrs Kelly and ANZ Bank's chief executive, Mike Smith, who spoke at the same conference this week, in praising the strong policy responses by the Government and the Reserve Bank in helping to offset the worst of the global downturn.
The Federal Government's twin stimulus packages totalling $52 billion and the deep cuts in interest rates by the Reserve Bank would help to "soften the impact" of the slowing economy.
Mr Norris also highlighted the strength of the Australian banking sector which, unlike the shattered financial services industries in the US and Britain, was now among the strongest in the world. With four of the only 12 globally "AA" rated banks, the Commonwealth, Westpac, ANZ and National Australia Bank were also now listed among the world's top 20 safest such institutions, he said.Each was profitable, well capitalised and, just as importantly, continuing to lend, as witnessed by the finance flowing to the housing market. That was being helped by three main drivers: a chronic undersupply of homes, the boost provided by first-time home buyers, who have been bolstered by the Government's direct grants, and the 400 basis points cut in interest rates.As for the state of consumer credit - a key indicator of both the economy's immediate health and the quality of the bank's lending book - Mr Norris said its housing and personal loan portfolios remained sound.While conceding that there had been a small rise in the arrears rate of those home-owners who were 30 days or more behind in their repayments, this, he argued, was off an historically low base.As to a recent jump in credit card arrears, that could be put down to a one-off change in the minimum monthly amount that borrowers now needed to meet
Thursday, April 2, 2009
Thursday, March 12, 2009
Housing shortage to increase
The federal opposition says housing shortages in the near future are likely to be far higher than predicted in a new report.In a report commissioned by the federal government, the National Housing Supply Council has confirmed there is plenty of land available for development on the fringes of Australia's major cities.But it says without significant government and industry intervention the housing crisis could increase tenfold by 2028.In 2008, the housing shortfall was around 85,000 dwellings.In three years, the number was expected to reach 203,000 and hit 431,000 by 2028.The forecasts are based on recent housing development and government funding trends.But if these trends slow, the predicted shortfall could top 800,000, the report warned.The shortfalls could also be higher than the report predicts because it fails to include the impact of the global financial crisis.Opposition housing spokesman Scott Morrison said the projections are "overly optimistic"."Banks and housing groups have been forecasting an undersupply of 200,000 dwellings in the next financial year and I think that's pretty accurate," he told AAP.Mr Morrison said exorbitant state and local government charges associated with new housing development must be cut and more land released.The government should also be doing more to help the private sector rather than public housing, he said.But National Housing Supply Council chairman Owen Donald said the majority of housing demand was coming from the bottom end of the market and people from lower socioeconomic backgrounds were going to be hardest hit as rents and housing prices lift.He said there had been a significant boost to housing investment, particularly in social housing, by the Rudd government but much more was needed."The absence of a very significant industry response and a very significant response from government will actually lead to a deterioration of housing supply ... and ... affordability," Dr Donald told reporters.Housing Minister Tanya Plibersek said the bleak outlook should not be seen as a sign that the Australian dream of home ownership was no longer achievable."No, this report shows that with government action and with industry responses we can begin to close the gap between housing demand and housing supply," Ms Plibersek told reporters.Ms Plibersek said it should also send a clear message to industry."The incentive is that they want to build the sort of houses that people want to buy, that's their bread and butter."
Saturday, March 7, 2009
housing sustained by first home buyers
It's only first-home buyers entering the property market that is keeping the sector afloat, the Property Council of NSW says.The housing market in Sydney's west is enjoying a mini-property boom, the latest figures from the NSW Office of State Revenue shows.The number of sold sales across all western Sydney suburbs for the three months to February soared by up to 20 per cent on last year, News Limited reported.Sales in suburbs such as Blacktown and Penrith sales are up 20 per cent. In Liverpool, Campbelltown and Fairfield they are up 12 per cent - to a six-year high.The number of contracts exchanged in the three months to February was up more than 1,100 over the same period last year.But it is only the first-home buyers that are producing the figures, the NSW Property Council says.Its executive director, Ken Morrison, says the figures point to the need for extending incentives to get buyers into the market."The rest of the market is very, very flat and falling and we saw that this week with new data out from the ABS (Australian Bureau of Statistics) on development approvals figures."So the rest of the market is extremely flat and falling."The only thing that is holding it up is this first home buyer incentive."NSW Treasurer Eric Roozendaal also attributed the sales increase to first time home buyers entering the market.He said that half the homes sold in the areas had been bought by first-home buyers, adding that more than 8,500 contracts had been exchanged in the last three months."We're seeing people take advantage of the NSW government stamp duty concessions and the first home-owners grant to move from rental accommodation into their first home," he told ABC Radio on Saturday.
well, lets see if the councils can see their way through being power wielding dictators and actually allow small developers to build and help the economy to resurrect instead of obstructing the way as they have been to date
Monday, March 2, 2009
Rate cut or not to rate cut, that is the question
The Reserve Bank's recent aggressive policy of interest rate cuts could be coming to an end this week, a prominent economic expert says. The RBA gave strong indications two weeks ago that it would be backing away from a series of drastic rate cuts that have seen four percentage points shaved off the cash rate in the past six months.While some are predicting the central bank will ease rates by as much as 1 percentage point tomorrow, others, including Macquarie Bank's interest rate strategist, Rory Robertson, think it could leave rates on hold. "I think this week's policy decision probably boils down to a choice between a 50-basis-point cut or a policy pause," he told AM. "The Reserve Bank's cut by four percentage points in the past five or six months; that's the sharpest easing in monetary policy in their history and mortgage rates in Australia now, in the 5 to 6 per cent range, are as low as they've been in 40 years. "So I think the Reserve Bank has flagged pretty clearly its inclination to think about pausing. "Whether or not it pauses tomorrow, I'm not sure. I think there is a real possibility the Reserve Bank will pause after cutting at five consecutive meetings."
Mr Robertson says he thinks Australia is heading into a recession, but he argues there may be justification for keeping some "fuel in the tank" for later interest rate cuts to stimulate the economy. He says with the second stimulus package injecting money into the bank accounts of millions of Australians from April, the Reserve Bank could afford to see whether the economy recovers without the need for further rate cuts. "The Australian economy to this point hasn't shrunk at a dramatic pace," he said. "We've cut as hard as any other central banks have cut and our policy rate is actually connected to something that matters and that's mortgage rates at least," he said. "So I think there is room for the Reserve Bank to take into account of the fact that interest rates have come down across the economy, there have been two fiscal packages, and the Australian dollar has come down a lot. "I'm not convinced that faster is better in terms of rate cuts from here. I think that's the story the Reserve Bank is in the process of telling."Don't expect a rate cut this month.
Mr Robertson says he thinks Australia is heading into a recession, but he argues there may be justification for keeping some "fuel in the tank" for later interest rate cuts to stimulate the economy. He says with the second stimulus package injecting money into the bank accounts of millions of Australians from April, the Reserve Bank could afford to see whether the economy recovers without the need for further rate cuts. "The Australian economy to this point hasn't shrunk at a dramatic pace," he said. "We've cut as hard as any other central banks have cut and our policy rate is actually connected to something that matters and that's mortgage rates at least," he said. "So I think there is room for the Reserve Bank to take into account of the fact that interest rates have come down across the economy, there have been two fiscal packages, and the Australian dollar has come down a lot. "I'm not convinced that faster is better in terms of rate cuts from here. I think that's the story the Reserve Bank is in the process of telling."Don't expect a rate cut this month.
Tuesday, February 17, 2009
Economists predict modest rate cuts
Economists doubt the Reserve Bank of Australia (RBA) has finished cutting the official cash rate just yet, but borrowers shouldn't rely on any more aggressive reductions.The RBA's minutes from its February board meeting - where it cut the cash rate by another 100 basis points - indicate the central bank remains concerned about the short-term prospects for the economy.It says its 400 basis points worth of rate cuts since September and the government's stimulus package will give a "significant" boost to the economy, but will take time to be effective."Given the speed at which the global contraction had occurred, short-term prospects were thus still for weakness in demand and output," the minutes said."Nonetheless, the substantial measures taken would help to cushion the economy from the contractionary forces coming from abroad and, over time, work to establish conditions conducive to stronger demand later in the year."Macquarie Securities economist Benjamin Dinte said the RBA would be hesitant to continue lowering rates at an aggressive pace."(But) we do believe that further softness in global economic conditions and domestic confidence is enough to justify another reduction in rates in March," he said.Federal Treasurer Wayne Swan conceded the government's latest $42 billion stimulus package, which passed the parliament last week, will take time to work through the economy."That's what the government has said about the package and why we moved so swiftly last October and again in recent weeks," Mr Swan told reporters.Economists are looking for the government's $10.4 billion stimulus package announced in October to help lift Wednesday's December quarter retail sales by 1.0 per cent after just 0.1 per cent growth in the previous three months.New opposition treasury spokesman Joe Hockey, unsurprisingly, doesn't believe the government has got the response to the global recession right."It's time to be prudent, it's time to be careful, it's not a time to panic," Mr Hockey told the Fairfax Radio Network."You have to show confidence, you have to believe things are going to get better, you have to have a plan to get things better. I don't think the government is doing any of that."But Mr Swan said it was the coalition that didn't understand the depth of the global recession and the type of response required."You've seen underscored today from the Reserve Bank minutes the need for a very substantial fiscal stimulus for our economy," he said.Still, despite the expected boost to consumer spending, the RBA expects the December quarter gross domestic product will be "broadly flat"."... a relatively good result in comparison with other developed economies," the minutes said.JP Morgan Australia chief economist Stephen Walters said it was the performance of those other economies that was likely to determine the need for further interest rate cuts.He said economic conditions among Australia's major trading partners had shown an "alarming deterioration" particularly in Japan - Australia's largest single destination for exports - where output had collapsed."Already, on current forecasts ... 62 per cent of Australia's export partners will be in recession in 2009, including eight of the top 10 destinations," he said."A pause (in rate cuts) next month is possible if economic conditions improve, but so too is a cut of more than 50 basis points, depending on how the data prints, particularly offshore."Financial markets have fully priced in a 50 basis points cut by the RBA next month.
Thursday, February 12, 2009
$42b stimulus package for Australia
The Rudd Government will pour an extra $42 billion into the economy over the next four years in its latest bid to defy the economic gravity that is dragging down economies around the world.
The extra spending was contained in a package of measures announced today by Prime Minister Kevin Rudd and Treasurer Wayne Swan, as the Government battles to adjust its policies and forecasts fast enough to cope with the rapidly deteriorating global economy. It brings the total stimulus efforts by the Government to $88.7 billion.The Government also halved its 2008/09 growth forecast for the economy to 1% from a November forecast of 2%. Today's spending package includes $28.8 billion for infrastructure, schools and housing, as well as $12.7 billion cash payments for low and mid-income earners, to be paid in March, 2009.''The Government will move heaven and earth to reduce the impact of the global recession on Australia,'' Mr Rudd said .
Opposition Leader Malcolm Turnbull, speaking on Sky News, pledged to work with the Government on the stimulus budget but said the Opposition would go through the spending proposals ''line by line'' in the coming days.The "substantial" package ''will be felt in the short term,'' said ANZ economist Katie Dean. "It should provide a significant boost to growth in the March and June quarters" and "may delay a technical recession''.Nonetheless, the scale of the global slowdown will likely overpower the Government's best efforts to prevent the recession from taking hold here, she said.''A lot of the shock has already flowed into the economy and it will be very difficult to for Government to avert a very sharp downturn in business investment.''
Today's additional outlays are expected to support about 90,000 jobs over the next two years, the Government said.Calling the global financial crisis ''a crisis not of Australia's making,'' Mr Rudd flagged an "exit strategy" to running public debts and said economic growth should eventually return the budget to surplus ''over time''.The Government would keep future discretionary spending to 2% in coming years in an effort to ease debt.However, he warned, "no one knows how long and deep this part of the economic cycle will be''.The announcement comes just hours before the Reserve Bank is expected to do its bit to help spark a revival in confidence among consumers and businesses alike. The bank's board is meeting today and markets expect it will cut its key interest rate by at least 100 basis points, or 1 full percentage point, to 3.25% when it reveals its decision at 2.30pm.
Red ink
The additional spending - coming on top of other measures including October's $10.4 billion stimulus plan - means the Federal budget faces years of deficits. Canberra has not clocked up a budget deficit since 1997-98.Mr Rudd said the Government now predicts its deficit for the year to June 30 will total $22.5 billion alone. That shortfall compares with projections of a surplus of $5.4 billion as recently as November and a massive $21.7 billion surplus when it announced its budget last May.The deficit will expand further to $30 billion in the following two years.
Feb 5, Mr Rudd said the global financial crisis would punch a $115 billion hole in the Government's expected revenues between this year and 2011-12, with taxes from businesses set to shrink by $76 billion alone as profits wither.That revenue drop prompted ANZ economist Katie Dean to forecast this year's Federal deficit would come in at between $10-15 billion (about 1% of gross domestic product), rising to as much as $35 billion next fiscal year.''The Government is doing what they can, given their finances, but the pull from not only dysfunctional credit markets and but deepest global recession since the 1940s, is too much,'' ANZ's Dean said.
Other countries are preparing big spending programs in a bid to reverse a slowdown that is now dogging virtually every economy.The new US administration led by President Barack Obama is seeking Congressional support for a stimulus package of at least $US819 billion ($1.3 trillion), or equivalent to about 5.8% of the country's GDP.
Growth, jobless
Asia, home to six of Australia's 10 largest trading partners, has seen a sharp slowdown in growth in the past six months, triggering big falls in prices of many of Australia's main exports with more to come.''The global economic outlook has drastically deteriorated since Mid-Year Economic and Fiscal Outlook 2008-09," today's report by the Government stated.In the wake of the intensification of the financial crisis in September 2008, confidence has fallen and the inter-connected impacts of declining orders, production and employment have combined to produce the most extraordinarily synchronised slump in global economic activity in decades."
"The December quarter 2008 is likely to have recorded the weakest quarterly global GDP performance since World War II."Apart from halving this year's GDP growth rate for Australia, the Government today predicted growth would slow further to 0.75% next fiscal year.Those tallies compare with respective forecasts of 2% and 2.25% made by the Government in November.More people are now expected to lose their jobs as the economic downturn savages business, with the unemployment rate now forecast to rise to 5.5% in 2008-09 and 7% in 2009-10.In November, the Government had forecast respective jobless rates of 5% and 5.75%.
The unemployment rate was 4.5% in December.
Bonus payments
The $12.7 billion cash payments will include one-off bonus payments of $950 each for low- and middle-income households and individuals through five bonuses to be paid in the next few weeks through either the Australian Tax Office or Centrelink.It means 8.7 million workers earning $100,000 or less will receive a lump sum payment of $950 each from April.About 1.5 million single-income families will also receive the payment, provided they receive Family Tax Benefit Part B, in the fortnight beginning March 11.Farmers will also receive a $950 bonus payment, as will families eligible for FTB Part A who have a child at school. They will receive an immediate payment of $950 this week.The Government will also provide a one-off $950 training and learning bonus for eligible students and people outside of the workforce returning to study to help with the costs of education and training.The package, which is virtually a mini-budget in all but name, is the second major economic stimulus package announced by the Government since the $10.4 billion economic security strategy released in October.
$88.7 billion and counting
It takes the total amount spent by the Government on stimulating the economy since september to $88.7 billion, including bank deposit guarantees, the car industry package, as well as nvestment in residential-backed mortgage securities, local government, infrastructure projects, and on the states through the Council of Australian Governments (COAG).The statement said that while the nation was in a better position than most other countries to weather the global recession, Australia could no longer ''resist the pull of global economic forces''.The infrastructure spending in this package involves a major roll-out of $890 million to fix accident black spots, install rail boom gates, repair regional roads and build community infrastructure such as libraries, town halls, community centres and sport centres.Schools around Australia will benefit from $14.7 billion over three years to construct school halls, libraries, indoor sports facilities and performing arts centres.The package includes funds of between $250,000 and $3 million for primary schools for capital expenditure projects and $1 billion for the construction of science and language laboratories in secondary schools, while all schools will be able to apply for extra funding of between $50,000 and $200,000 for minor maintenance and infrastructure.
Housing, small business
Public and community housing will receive a $6 billion boost to allow for the construction of about 20,000 new homes to be completed by December 2010.Small business also gets $2.7 billion in extra tax breaks aimed at supporting jobs.This means, for example, a business which buys a $2000 computer by the end of June this year will receive a $600 additional deduction while a business which buys a $60,000 backhoe before the end of June will receive an extra $18,000 deduction.The Government will also provide free ceiling insulation to 2.7 million homes to improve energy efficiency by increasing the solar hot water rebate from $1000 to $1600 from Tuesday and the low emissions plan for renters rebate will double to $1000.
The extra spending was contained in a package of measures announced today by Prime Minister Kevin Rudd and Treasurer Wayne Swan, as the Government battles to adjust its policies and forecasts fast enough to cope with the rapidly deteriorating global economy. It brings the total stimulus efforts by the Government to $88.7 billion.The Government also halved its 2008/09 growth forecast for the economy to 1% from a November forecast of 2%. Today's spending package includes $28.8 billion for infrastructure, schools and housing, as well as $12.7 billion cash payments for low and mid-income earners, to be paid in March, 2009.''The Government will move heaven and earth to reduce the impact of the global recession on Australia,'' Mr Rudd said .
Opposition Leader Malcolm Turnbull, speaking on Sky News, pledged to work with the Government on the stimulus budget but said the Opposition would go through the spending proposals ''line by line'' in the coming days.The "substantial" package ''will be felt in the short term,'' said ANZ economist Katie Dean. "It should provide a significant boost to growth in the March and June quarters" and "may delay a technical recession''.Nonetheless, the scale of the global slowdown will likely overpower the Government's best efforts to prevent the recession from taking hold here, she said.''A lot of the shock has already flowed into the economy and it will be very difficult to for Government to avert a very sharp downturn in business investment.''
Today's additional outlays are expected to support about 90,000 jobs over the next two years, the Government said.Calling the global financial crisis ''a crisis not of Australia's making,'' Mr Rudd flagged an "exit strategy" to running public debts and said economic growth should eventually return the budget to surplus ''over time''.The Government would keep future discretionary spending to 2% in coming years in an effort to ease debt.However, he warned, "no one knows how long and deep this part of the economic cycle will be''.The announcement comes just hours before the Reserve Bank is expected to do its bit to help spark a revival in confidence among consumers and businesses alike. The bank's board is meeting today and markets expect it will cut its key interest rate by at least 100 basis points, or 1 full percentage point, to 3.25% when it reveals its decision at 2.30pm.
Red ink
The additional spending - coming on top of other measures including October's $10.4 billion stimulus plan - means the Federal budget faces years of deficits. Canberra has not clocked up a budget deficit since 1997-98.Mr Rudd said the Government now predicts its deficit for the year to June 30 will total $22.5 billion alone. That shortfall compares with projections of a surplus of $5.4 billion as recently as November and a massive $21.7 billion surplus when it announced its budget last May.The deficit will expand further to $30 billion in the following two years.
Feb 5, Mr Rudd said the global financial crisis would punch a $115 billion hole in the Government's expected revenues between this year and 2011-12, with taxes from businesses set to shrink by $76 billion alone as profits wither.That revenue drop prompted ANZ economist Katie Dean to forecast this year's Federal deficit would come in at between $10-15 billion (about 1% of gross domestic product), rising to as much as $35 billion next fiscal year.''The Government is doing what they can, given their finances, but the pull from not only dysfunctional credit markets and but deepest global recession since the 1940s, is too much,'' ANZ's Dean said.
Other countries are preparing big spending programs in a bid to reverse a slowdown that is now dogging virtually every economy.The new US administration led by President Barack Obama is seeking Congressional support for a stimulus package of at least $US819 billion ($1.3 trillion), or equivalent to about 5.8% of the country's GDP.
Growth, jobless
Asia, home to six of Australia's 10 largest trading partners, has seen a sharp slowdown in growth in the past six months, triggering big falls in prices of many of Australia's main exports with more to come.''The global economic outlook has drastically deteriorated since Mid-Year Economic and Fiscal Outlook 2008-09," today's report by the Government stated.In the wake of the intensification of the financial crisis in September 2008, confidence has fallen and the inter-connected impacts of declining orders, production and employment have combined to produce the most extraordinarily synchronised slump in global economic activity in decades."
"The December quarter 2008 is likely to have recorded the weakest quarterly global GDP performance since World War II."Apart from halving this year's GDP growth rate for Australia, the Government today predicted growth would slow further to 0.75% next fiscal year.Those tallies compare with respective forecasts of 2% and 2.25% made by the Government in November.More people are now expected to lose their jobs as the economic downturn savages business, with the unemployment rate now forecast to rise to 5.5% in 2008-09 and 7% in 2009-10.In November, the Government had forecast respective jobless rates of 5% and 5.75%.
The unemployment rate was 4.5% in December.
Bonus payments
The $12.7 billion cash payments will include one-off bonus payments of $950 each for low- and middle-income households and individuals through five bonuses to be paid in the next few weeks through either the Australian Tax Office or Centrelink.It means 8.7 million workers earning $100,000 or less will receive a lump sum payment of $950 each from April.About 1.5 million single-income families will also receive the payment, provided they receive Family Tax Benefit Part B, in the fortnight beginning March 11.Farmers will also receive a $950 bonus payment, as will families eligible for FTB Part A who have a child at school. They will receive an immediate payment of $950 this week.The Government will also provide a one-off $950 training and learning bonus for eligible students and people outside of the workforce returning to study to help with the costs of education and training.The package, which is virtually a mini-budget in all but name, is the second major economic stimulus package announced by the Government since the $10.4 billion economic security strategy released in October.
$88.7 billion and counting
It takes the total amount spent by the Government on stimulating the economy since september to $88.7 billion, including bank deposit guarantees, the car industry package, as well as nvestment in residential-backed mortgage securities, local government, infrastructure projects, and on the states through the Council of Australian Governments (COAG).The statement said that while the nation was in a better position than most other countries to weather the global recession, Australia could no longer ''resist the pull of global economic forces''.The infrastructure spending in this package involves a major roll-out of $890 million to fix accident black spots, install rail boom gates, repair regional roads and build community infrastructure such as libraries, town halls, community centres and sport centres.Schools around Australia will benefit from $14.7 billion over three years to construct school halls, libraries, indoor sports facilities and performing arts centres.The package includes funds of between $250,000 and $3 million for primary schools for capital expenditure projects and $1 billion for the construction of science and language laboratories in secondary schools, while all schools will be able to apply for extra funding of between $50,000 and $200,000 for minor maintenance and infrastructure.
Housing, small business
Public and community housing will receive a $6 billion boost to allow for the construction of about 20,000 new homes to be completed by December 2010.Small business also gets $2.7 billion in extra tax breaks aimed at supporting jobs.This means, for example, a business which buys a $2000 computer by the end of June this year will receive a $600 additional deduction while a business which buys a $60,000 backhoe before the end of June will receive an extra $18,000 deduction.The Government will also provide free ceiling insulation to 2.7 million homes to improve energy efficiency by increasing the solar hot water rebate from $1000 to $1600 from Tuesday and the low emissions plan for renters rebate will double to $1000.
Wednesday, January 28, 2009
Rates to be 2.5%, cost of living falls
A massive fall in petrol prices has pushed the cost of living down for the first time in two years and opened the way for interest rates to fall to as low as 2.5 percent.Petrol prices fell by more than 18 percent in the December quarter as unleaded petrol fell from around $1.50 per litre in September to close to $1.00 per litre in December, mirroring falling oil prices.According to official figures released today, the consumer price index – which tracks the cost of living in Australia – fell by 0.3 percent in the December quarter. Over the 12 months to December, the CPI rose by 3.7 percent, well below its previous reading of 5 percent.The fall in the cost of living - which is the fastest decline logged in 10 years - is expected to open the way for further rate cuts from the Reserve Bank of Australia (RBA), starting with its first meeting of the year, to be held next week.Economists expect the RBA to trim the cash rate by 75 basis points, a move that would take the cash rate to 3.5 percent.“There’s nothing of concern in these figures for the Reserve Bank that will stop it aggressively cutting interest rates next week,” Riki Polygenis, economist at ANZ Bank told ninemsn.She believes rates will fall by 75 basis points next week and will ventually fall to 2.5 percent this year.While the fall in prices and interest rates may be good news for consumers, other economic figures released today showed a sharp slowdown in economic activity.The Westpac/Melbourne Institute index of economic activity - which tracks the likely pace of economic growth in the future - contracted by 2.2 percent in November, and analysts said it showed that the odds of Australia entering a recession this year are shortening.“With the –2.2 percent growth rate for November we are now reporting the first negative reads for growth since May 2001,” said Bill Evans, Westpac’s chief economist. “In the past this has been a useful signal ofthe likelihood of Australia experiencing a recession.
28/01/2009 By Stuart Fagg, ninemsn Money
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