RBA looks to rate cut

Reserve Bank Governor Ian Macfarlene addressed an Australian investment seminar in Tokyo yesterday, in what was his first public speech for the year. Several of his comments gave some indication of the Reserve’s outlook for the year ahead.

Governor Macfarlene continued to predict a significant slowdown in economic growth over the next six months, but also noted that the Reserve’s monetary policy objective was to maintain a sustainable rate of economic growth.

The Reserve Bank chief went on to say that while the current account deficit was increasing, to the point where it is now near 6 per cent of GDP, and looking like increasing further, the Reserve would continue to focus on economic growth. The other option to handle the current account deficit, to raise rates and slow down the economy was seen by the Reserve as “bad economic policy”.

So, with speculation of any rate rise being knocked on the head, it would still appear we will see a rate cut some time this year.