Westpac Predict 1% Interest rate cut by end of 2012

Meanwhile a sharp deterioration in unemployment expectations lends more weight to the view that consumer demand is entering a cyclical weakening. Indeed, the worsening picture on job security eff ectively negates the good news from improved sentiment.

Not only does it suggest actual labour market conditions are deteriorating, it also points to a material downturn in discretionary spending and is an additional negative for already soft housing markets where job loss concerns inhibit demand.

Looking ahead, steady rates and a reduced threat of rate rises should continue to allay consumer fears of rate hikes. But with rising uncertainty around the global economy and growing signs of weakness in local labour markets, I suspect that steady rates on their own will not be enough to restore consumer confidence.

I continue to expect that the next move from the RBA will be rate cuts starting with 25bps in December. Westpac is of the same view however they predict a total reduction of 100bps by Sep 2012.

Australian consumers are likely to remain badly out of sorts at least until an easing bias is apparent and most probably until actual rate moves are enacted.


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