Why the RBA needs to move on from its house price fixation

Pendal Group

Pendal Group

Either you win or you lose a currency war – and unfortunately the RBA is losing right now because they’re not cutting interest rates fast enough. The domestic economy is getting progressively worse; the iron ore price fell from over $60 to $51 in the space of just one month and many miners are now close to the break-even level on the cost of production. If the RBA really wants the $A to fall, their best bet is to cut rates even more proactively than the competition. Unfortunately, if the banks’ concern over the housing market delays it cutting rates for too much longer, the domestic economy will weaken further. The RBA has dangerously been relying on the Fed hiking cycle to start to get the $A lower. Even if they are right, this would only help the $A directly against the $US - and the US does not even constitute a super-dominant trading partner any more . What’s an investor to do? Click here to find out from Head of Income & Fixed Interest Vimal Gor (VIEW LINK)


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