Big rate cuts of 1.0 per cent predicted

Flat retail sales in November could spur the Reserve Bank to cut rates as soon as February say analysts.

HSBC's chief economist Paul Bloxham said Australian Bureau of Statistics figures showing retail turnover was up only slightly to $20.933 billion for November and would give focus to the Reserve's next interest rate decisions.

“We expect further RBA cuts in the first quarter of this year,” he said. “With rates now slightly below neutral and further rate cuts expected in the first quarter, we expect some improvement in the retail sector this year.”

Futures markets are betting there will be a big fall in interest rates – 100 basis points – to a low of 3.25 per cent by August.

The RBA does not meet this month but most economists expect a cut at the first meeting for the year next month.

Source: Herald Sun