AUD is low, and in a downwards trend. Property prices are too high, and rising. Employment is very strong. Justifies high immigration. Both of which push property prices higher. Inflation has turned upwards.
All of which points to an unmistakable need for a higher cash rate.So, an interest rate rise is on the cards for next Tuesday?
Most market commentators seem to try to influence the RBA's decisions by constantly reiterating that current interest rates are already high and that people cannot take any more interest rate rises. Then, using their immense skills, these commentators usually predict when the first rate falls will occur.
For example, atm all the banks seem to be in lock-step agreement that rate cuts will begin in November.
For example, in 2021 and 2022 a frequent contributor to a popular online market news and opinion website was adamant that after the first 1% of rate rises, then house prices would fall by 15%-25%. This view was justified by pointing to the RBA's own research that indicated that if the cash rate got as high as 4.25% then this would imply that house prices would fall by 30%-40%.
For example, the ABC today published an article in which it is stated " ... head of research ... said higher interest rates ... are keeping property prices higher." This is the opposite of elementary economics that indicates that the lower the interest rate then the more money that people can borrow, resulting in higher house prices. This used to be an accepted economic fact, but apparently not any more. Apparently, faced with a possible rise in interest rates it appears that now high interest rates have to be blamed as being one of the causes of high house prices. Are there any experts reading this thread who can explain why higher interest rates would keep property prices higher? I expect that this apparent reversal of logic will be seized upon by countless media hacks who aim to improve their ratings by lobbying for cuts in the cash rate.
For example, it is a long time since I heard any politician say anything that indicates that they possess even a moderate knowledge of economics. In the modern world, this sort of knowledge is a definite handicap to any politician's career because it precludes them from mouthing whatever economic garbage happens to be convenient at the time.
The list of examples goes on and on.
The RBA seems to like all the nonsense that appears in the media, possibly because most of the garbage appears designed to pressure the RBA to keep rates low, which seems to suit the RBA just fine.
Interestingly, one economist has now forecast three rate rises this year. This is just one voice among hundreds. In my opinion, the cash rate is currently about 1% too low. So, make that two voices.
I think that the Australian financial system is too flawed, for example in my opinion there are conflicts of interest at the RBA, for there to be anything other than more of the same old same. So, my prediction for Tuesday is that the cash rate will not change. I think that if the RBA decides to say that interest rates "might" need to rise in the future then the RBA will consider that by just saying this then they will have done more than enough to justify their existence. For this there will be plenty of plausible-sounding reasons. The RBA is never properly held to account for getting anything wrong, despite the ridiculously high salaries that they receive from taxpayers, so there is zero pressure on the RBA to raise rates to a realistic level which by so doing would be an admission that they had got it wrong previously.
So, because today there is a logical fear that interest rates may need to rise, I expect that it will be the XJO that rises on Tuesday when it becomes clear that there is fat chance of a rate rise.
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