So here’s our interest rate outlook – in a nutshell…

No change to official interest rates in 2018.

…But don’t be fooled…..there will be plenty of interest rate tweaking from all of the banks as they continue to compete to provide loans to personal and business customers.

Why do we think this?

  • Improving business confidence and jobs growth are still not translating into wages growth and inflation.
  • Consumer spending is still ‘fragile’ due to high levels of household debt and as such the RBA doesn’t want to spook consumers with a rate rise.
  • The $A is still high. Raising official interest rates above the current 1.5% level would only send the $A higher and hurt exporters.
  • Rising interest rates in the USA, potential US trade tariff announcements and other ‘off the hip’ broadcasts from President Trump will continue to cause stock market volatility which will make it more difficult for the RBA to see a clear economic pathway. This will in turn lead to a ‘wait and see’ approach to monetary policy.
  • APRA bank regulator intervention in lending volumes has had its desired impact to dampen an overheated east coast property market.
  • NSW residential market now showing signs of weakening.
  • Continued government (Royal Commission), APRA and ASIC investigations on the banks will limit the availability of credit and subdue economic growth.

Final thoughts

What we find fascinating is that the current intense scrutiny on the Australian banking system is already producing markedly different responses from the banks.

Some banks have retreated into their shells to weather the potential storm. Others are rapidly embracing industry and regulatory change to offer customers more reliable and trustworthy banking services.

Continued competition and innovation within the banking industry will lead to better consumer outcomes.

Your Finance Broker knows who to talk to in the banks. Touch base now.