Will the RBA cut rates this week?
Experts are forecasting that the Reserve Bank will take a dramatic measure and fire its last bullet, cutting rates out of cycle this week before starting quantitative easing.
According to Finder’s RBA Cash Rate survey, 53 per cent of experts and economists are predicting further easing this week.
Noel Whittaker, QUT, said, “Everybody else is [cutting; the RBA doesn’t] have much option,” as he predicted a rate reduction will happen later this week.
While Mark Crosby of Monash University believes businesses need further support despite the government recently announcing a $17 billion stimulus package.
“Businesses cannot function without a workforce while still paying rent and interest. The RBA and government need to do what it takes to get these costs closer to zero,” Mr Crosby said.
Recession likely but will be short-lived
Not only are economists tipping the RBA to make drastic changes, they are also expecting Australia’s 28 years without a recession to be over, with 87 per cent saying a short-term recession is likely.
Graham Cooke, insights manager at Finder, said COVID-19 has unexpectedly put pressure on an already weakening Australian economy.
“We’ve seen fear of recession among the Australian public grow over recent months, while the vast majority of economists were saying it wouldn’t happen,” Mr Cooke said.
The impacts of the recession are predicted to hit the stock markets, with experts also asked how low the ASX could plunge before a recovery, with the average economist pointing to a bottom of 4,460.
“If markets plunge to the depths predicted here, it will be a 37 per cent drop since the market peak of 20 February. This will be the most significant drop since the 53 per cent plunge post-GFC,” Mr Cooke said.
Economists were divided as to whether the government’s stimulus package would be sufficient, with over half saying it was not.
Finally, most experts expected house prices to be negatively affected, with 20 per cent expecting a significant drop and 60 per cent expecting a slight drop.
Mr Cooke said this downturn in the market could present a window for cashed-up Aussies ready to buy.
Mr Cooke concluded: “If you’re one of the first-time buyers who missed out on the 2019 price dip, 2020 could provide a second bite at the apple.
“Keep a close eye on your local market, but be careful — nobody knows what may be around the corner or how long this coronavirus dampening could really last.”
