Interest rates need not be high on the list of concerns for Australians until the September quarter, according to three of the four big banks.
Interest rates need not be high on the list of concerns for Australians until the September quarter, according to three of the four big banks.
Westpac, NAB and ANZ all said they expected the Reserve Bank of Australia to hold off on increasing interest rates until the second half of the year, while the country’s biggest home lender, Commonwealth Bank of Australia, was the exception and said it expected an increase by May.
Economists generally agree that the central bank has done a lot of the heavy duty work in taming inflation pressures that would be a result of the mining boom and it’s generated investment plans.
RBA governor Glenn Stevens added to the theory; in a post-board meeting statement on Tuesday he said he believed the current state of policy was appropriate following last year’s cash rate raises and additional increases on mortgage rates by home lenders.
The cash rate has stood at 4.75 per cent since November.
Westpac chief executive Gail Kelly told ABC television on Monday she agreed with her chief economist, Bill Evans, that rates would be on hold for a while.
“In fact, he would argue that there’s only likely to be one interest rate increase and that would be probably in the September quarter,” she said.
Still, crucial data will be released over the next two days that will show whether there has been any notable change in consumer behaviour towards spending rather than saving, and if there still remains strong demand for workers in an already tight labour market.
Both factors could impact the scheduling of a rate rise.
National Australia Bank has pushed back the timing of its prediction for the next rate move from May to August.
Releasing its monthly business survey on Tuesday, the NAB said there should be greater evidence of the income and investment effects of the mining boom and the reconstruction task from this summer’s natural disasters by the middle of the year.
NAB said there were “significant upside risks” to its assumptions, not least from a further sudden tightening in the labour market.
“Any tendency for wage pressures to increase and become embedded in inflation expectations would see the (RBA) adopting a more aggressive monetary policy stance than we have assumed,” it said.
ANZ’s head of Australian macro-economics, Katie Dean, is expecting the next interest rate rise in July, and that would only be brought forward if there are further large gains in employment and a strong rebound in retail sales over the next few months.
Still, CBA is concerned about growing inflation pressures with the labour market already at what is considered full employment, with an unemployment rate of just five per cent.