Despite the mid-year tax cuts, a slew of bleak economic data may result in even deeper ones from the Reserve Bank of Australia when it meets next month, according to a leading economist.

Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, said the RBA could cut the official cash rate by up to 1% to 4.25%. "Given the scale of the slump now occurring globally and the need to head off a sharp fall in house prices in view of the heavily indebted status of many Australian households, our view is that the cash rate will ultimately have to fall below 3% at some point next year. In the short term, the RBA appears to be on track for another 0.75% to 1% rate cut next month."

Oliver said that while 2009 is likely to be pretty tough, all is not lost. "Australia's long-term growth prospects remain bright given our exposure to China - which will resume its rapid industrialisation process after the current pause - and our financial system is in far better shape than those in many other countries," he added.
"In the short term, it should be kept in mind that a fair amount of stimulus is being pumped into the household sector and there's a lot more to come. Of course the uncertainty caused by rising unemployment means a big chunk of this will be saved, but it will certainly help avoid a big collapse in spending and - more importantly - at some point later next year, it will drive a recovery."

 

 

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan