They’re all wrong: RBA to cut rates again

So-called experts across the country are set to be blindsided, with the RBA shaping up to unexpectedly slash rates again.

So-called experts across the country are set to be blindsided, with the RBA shaping up to unexpected slash rates again.

An economics professor has boldly gone where few experts have gone so far, predicting the RBA will go back-to-back on rates relief at its April 1 meeting. And he’s not alone.

Professor Jeffrey Sheen was one of two experts to predict a rate cut out of a panel of 34, in Finder’s RBA Cash Rate Survey.

The Macquarie University academic said the headline inflation rate already “seems settled within the (RBA’s) target range,” making it marginally more likely to cut than hold in April.

“While core or underlying inflation measured by the trimmed rate is just above the range, more sophisticated statistical measures (e.g. from dynamic factor modelling) indicate that it is in the range,” Sheen said.

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REIA president Leanne Pilkington said job numbers warranted a rate cut.

“With the escalating global tariff war and the likely weakening of global economic activity, the RBA should act now in anticipation.

“The Board will be torn between the risk that inflation is not fully under control and the risk of a future downturn and recession.”

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US President Donald Trump has sparked a global trade war by slapping tariffs on numerous industries exporting goods to the US and Australia hasn’t been exempt.

Trump announced 25 per cent vehicle tariffs on Thursday, sending both the Japanese and South Korea economies into a spin. What Trump will do with Australian goods is up in the air, but the threat is creating economic uncertainty regardless.

Sheen’s sentiments were shared by Housing Industry Association chief economist Tim Reardon.

“A further cut is warranted,” Reardon said. “It will either be this month or next.”

While only 6 per cent of respondents believed the RBA would cut in April, 18 per cent believed the bank should cut.

Donald Trump’s trade war is creating economic uncertainty. Picture: Getty

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Real Estate Institute of Australia president Leanne Pilkington said recent job numbers showed an April cut would be shrewd.

“As well as sustained cost of living pressure and moderating inflation, the unexpected hit to employment figures has widened the window of opportunity for the RBA to cut rates, which it is expected to do in coming months anyway,” Pilkington said. “It might be prudent to act now.”

Graham Cooke, head of consumer research at Finder, said the second rate cut can’t come soon enough for households burdened by rising mortgage payments.

“The February cut signalled a turning point for many cash-strapped borrowers – they hoped a couple more would be coming thick and fast,” he said.

Finder head of consumer research Graham Cooke.

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“New inflation figures show headline inflation is within target range, so while we’re unlikely to see a second rate cut in April, we’re anticipating further relief from May onwards.”

Matthew Greenwood-Nimmo from University of Melbourne said the Board indicated that it would take a cautious approach to further rate cuts.

“Given that the economic data does not currently provide a strong case for further easing, it is likely that the cash rate will remain constant for now,” Greenwood-Nimmo said.

Originally published as They’re all wrong: RBA to cut rates again