Gor: Australian rates could get to 1% or lower

In a recent interview with ABC TV, Vimal Gor, Head of Income and Fixed Interest at BT Investment Management, said that it’s finally Australia’s turn to be hit with deflation.“It’s quite clear that the deflationary impulse that’s been flooding the world since the GFC has finally hit Australian shores.” The RBA has cut inflation forecasts while cutting rates, suggesting this may not be the last cut from the RBA. But how much of an effect can it have? As other central banks are beginning to discover, there seem to be limits to what monetary policy alone can achieve. “Central banks are throwing everything they possibly can at the world financial system and they can’t engineer inflation,” he said. Despite ever increasing monetary easing, growth and inflation forecasts continue to be revised down. “Rates (in Australia) can head down to 1%, and potentially even lower.”