Looking very promising for at least a full 1% cut on the 2nd Dec. The more articals and analysts predicting massive drops in rates makes me even more confident to look at purchasing more properties next year. I see some of the big 4 have 1 year fixed rates in the high 5's and variable in high 6's. No need to lock in just yet IMO if irates continue this downward trend......
November 24, 2008 11:57am THE official cash interest rate, targeted by the central bank in its monetary policy actions, is forecast to fall to its lowest level since early 1960 by Easter next year.
Debt futures markets are on Monday pointing to a cash rate of 2.75 per cent by April, down from 5.25 per cent at present.
The cash rate was at 2.9 per cent in early 1960.
Debt futures market are also tipping the RBA to cut the cash rate by a massive 125 basis points in December after its next board meeting.
This would be the biggest cut to official interest rates since the onset of the 1990 recession.
ABN Amro chief economist Kieran Davies said a shrinking Australian economy, falling asset prices and recession-like levels of business confidence will make the RBA more inclined to cut rates aggressively.
"The wealth effect of falling asset prices is snowballing and the Chinese economy is slowing very sharply,'' he said.
"Also, we think the economy is contracting now. We are close to zero.''
A 125 basis point rate cut in December would take the cash rate to 4 per cent.
It would be the biggest cut since April 1990, when the RBA slashed the then 16.5 per cent cash rate by 150 basis points as the Australian economy entered into a recession.
The cash rate was at 4.25 per cent in late 2001 and has not been below that level since the RBA began publishing its cash rate target in 1990.
Mr Davies, who is expecting a smaller 75 basis point rate cut in December, said the RBA was worried about a slowing world economy.
"They're factoring very low rates in the rest of the world,'' he said.
The RBA board next meets on December 2 and its rates decision will be announced at 2.30pm (AEDT).
