In just over a week 3 separate articles have appeared in the Australian Financial Review whereby a big 4 banking executive has put forward their argument that the RBA should hold-off on any further interest rate cuts.
The sentiment from ANZ CEO Mike Smith, NAB CEO Cameron Clyne and Westpac Chief Economist Bill Evans are essentially the same, that market conditions look to have positively changed and that it is possible, even likely, that the economy is speeding up (in a positive way at this time) and as such the RBA should wait for longer to confirm such is, or isn’t, the case before any further lowering of interest rates.
When economic prudence is not a strong enough argument the discussion quickly reverts to one of protecting us from an imminent property bubble if interest rates are lowered any further.
I am not saying that their claims are wrong, or that their motivations are not entirely altruistic (although this beggars belief), however given the lag between economic hypothesis and outcome I believe both arguments are quite plausible.
My main observation was not the economic predictions but the coincidence in the timing of the barrage of the somewhat formulaic articles. They smell of a public relations campaign coordinated by the Australian Bankers Association.
Bill Evans “tips no rate cut until next year”.
Given the influence of the Australian Bankers Association and the support the federal coalition received from the banking sector leading up to their election victory I could only imagine that the Board members of the RBA will under some pressure to listen (that is not to imply that the RBA is subject to political pressure).
Darren Lelliott “tips no rate cut until next year”, and by that time there will no longer be need for further interest rate cuts. Therefore, my real tip is that interest rate cuts have gone as low as they are going to.
Evans tips no rate cut until next year, AFR 4th Oct 2013
ANZ chief tells RBA to hold off on rate cuts, AFR 9th Oct 2013
NAB chief asks for time before rates cuts, AFR 10th Oct 2013