Could a further two interest rate cuts be on the cards for 2014?

Could a further two interest rate cuts be on the cards for 2014?

Posted on Thursday, February 13 2014 at 9:19 AM

One of the country’s leading economists is predicting a drop in the cash rate to two per cent before the end of this year.

Bill Evans, chief economist at Westpac, says he expects a further two
cuts in rates between June and December 2014.

“I think rates are going to continue to come down.”

Speaking at the Australian Property Institute’s annual Economic
Indicators lunch in Brisbane last week, Evans conceded his outlook wasn’t in line
with other commentators.

“I’m probably the last drowning man who thinks that’s possible…  but my view is that the dynamics that the
Reserve Bank described today describing why interest rates are on hold and why
they’re likely to rise – I think they’re a little too optimistic around a
flaccid world economy.”

Evans has been one of the industry’s most accurate predictors of
interest rate movements over the past few years.

His bearish view of the Australian economy includes an unemployment rate
drifting up to 6.5 per cent.

He says a weak world economy is likely to weigh on business confidence
and consumers through “job insecurity”, and the election hasn’t been a “circuit
breaker” for the nation.

It wasn’t all bad news for the local crowd, however, with Evans
predicting Brisbane’s property market will have good growth in the coming 12

“I really do believe that the housing story is starting to stir in
Queensland, and in Brisbane in particular of course.”

Evans says a strong property market performance in both Melbourne and
Sydney has created relative affordability in Brisbane, which should translate
into population growth.

“There’s a huge catch-up effect which I believe is extremely likely to
happen in the Brisbane market.”

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