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RBA eyes another rate cut

It now seems all but certain that the Reserve Bank of Australia will cut the official cash rate again in February. According to recent domestic data, there is a real need for another rate cut, with both consumers and businesses remaining extra cautious about borrowing. Another rate cut would take the official rate to just 4 per cent – 100 basis points above the historic low.

Housing and business credit was flat in November and has barely expanded over the past year. This sluggish corporate borrowing arguably also reflects a preference to use retained earnings rather than use external funding sources.

I believe the RBA will lower Australia's official cash rates by a further 0.25 per cent to 4.0 per cent in February.