Increases in cost of living expenses will more than offset any interest rate cuts over the next 12-24 months. This will be compounded with the implementation of the carbon tax.
The world as a whole is moving towards a Zero Interest Rate Policy where the further accumulation of significant debt on the way to the bottom will mean future rate increases will be impossible.
Australia is now starting to participate in this such behaviour. Small incremental cuts along the way will be absorbed with no real effect. Cuts will therefore need to be significantly larger or consecutive in nature to have an influence. Rate rises, as we have experienced in the last cycle will become smaller and more damaging due to higher debt loads.
We're sitting on 5% unemployment and near record TOT and now experiencing a rate cutting cycle. This is a dangerous game in which the end result is quite obvious.
