The Reserve Bank of Australia (RBA) is widely expected to lower interest rates by 25 basis points to 3.50 percent at its next meeting Tuesday, however, slowing housing and retail sectors could push the central bank into a more aggressive rate cutting cycle with the market expecting up to 165 basis points in cuts over the year.
“We think rates could come down by 100 basis points over the next few months… Australia’s rates are too high (and) the domestic economy is clearly in need of further stimulus,” Bill Evans, Global Head of Economics, Westpac told CNBC Asia’s “ Squawk Box ” on Monday.
Evans, who believes the RBA could surprise with a 50 basis point rate cut on Tuesday, says, “The housing market, which is the most interest rate sensitive part of the economy and is very important for jobs and the economy, is in desperate need of some support.”
In May, housing prices fell 1.4 percent across all capital cities to a six-year low, with Melbourne the worst performing city, according to data published by research firm RP Data.
Retail sales, which make up around 20 percent of gross domestic product (GDP), are also losing momentum, declining for the first time in 10 months in April against a consensus forecast of a modest rise.Page 1 of 3 | Next Page