SYDNEY, Nov 6 AAP - It's very probable Australian interest rates could be on hold for quite some time after the Reserve Bank of Australia chose not to alter interest rates today. Westpac Banking Group maintained its view that rates will be on hold for a while, and may not change until the third quarter of 2003, either to be raised or lowered. However, it is not discounting the potential for an earlier rate cut if certain factors deteriorate significantly beyond expectations. The Reserve Bank did not change the cash rate of 4.75 per cent today, after yesterday's board meeting, for the fifth month in a row. The central bank in its August quarterly statement on monetary policy had signalled it was still considering moving rates to more "neutral" levels, judged by the market to be around 5.5 per cent. "We have been saying no more rate rises until the second half of next year," Westpac Bank senior economist James Shugg said. "The reason is international environment remains uncertain, the added worry of the drought and the leading indicators for the housing sector look like they may be turning ... if we see in 2003 housing activity tapering off that would be one less reason to worry about the domestic economy overheating." He said, also, consumer sentiment had been trending down for six months. "You get a picture of an economy that is probably going to be underperforming relative to trend over the next year ... by leaving rates at this level they are accepting it is appropriate to keep stimulating the economy through interest rates." He said next Monday's quarterly statement from the RBA would probably reflect a key change in its tone. "We would expect to see some softening in their stance." Mr Shugg added that if Australia's housing downturn worsened beyond expectations and the US economy remained very weak these could combine to bring a rate cut over the next year. "But I stress that at this stage it is not our thinking ... it is plausible and you have to attach a weighting to it." He said such conditions for a rate cut, if they happen, could be manifesting by the end of the first quarter next year. RBC Capital Markets senior economist Su-lin Ong said it was conceivable Australia could be in for a long period of no rate changes. "It looks like we are in for a prolonged period of continued low rates," she said. "We don't think the Reserve Bank is going to tighten, we think they're going to be on hold probably for the next six months, possibly the whole of 2003." AAP
