This note by Shane Oliver looks at the implications from the RBA’s latest interest rate cut. The key points are as follows:
- The RBA was right to cut interest rates again. Growth is too low and inflation is benign. Expect the cash rate to fall to 2% in the months ahead.
- Record low borrowing rates, the lower $A and the boost to spending power from lower fuel prices should help boost growth to 3% or just over into next year.
- For investors: bank term deposits offer poor returns; remain wary of the $A; favour Australian over global bonds; and shares, commercial property & infrastructure continue to offer attractive yields.
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