The economic forecast: sunny with ongoing low rates
Given the ongoing lockdowns and border restrictions, the Reserve Bank yesterday kept interest rates at the historic low of 0.1% for the 9th month in a row. But Governor Philip Lowe said the RBA is confident the economic setback should only be “temporary” as vaccination rates increase and restrictions are eased. The most recent figures found Australia’s economy grew by an all-time high of 9.6% in the year to June – well above forecasters’ expectations. But spoiler alert: ongoing lockdowns could see the economy shrink by 4% in the July-September quarter. And then there’s plummeting iron ore prices as China clamps down on imports… All that uncertainty means interest rates are expected to stay put until 2024, Lowe reckons. Some analysts disagree, including those at the Commonwealth Bank, which expects rates to rise by November next year.
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