RBA likely to cut at close-call meeting
Market watch top headlines
November 30 2012, 3:39PM
By Caroline Smith
SYDNEY, Nov 30 AAP - Australian households could get an early Christmas present in the form of a rate cut by the Reserve Bank of Australia (RBA) - but it will be a close call.
An AAP survey of 15 economists shows most expect the RBA to cut rates by 0.25 per cent at its meeting on Tuesday, December 4, with evidence of slowing growth likely to overwhelm improved consumer sentiment and global stability.
At its last meeting on November 6, the bank decided to keep rates steady at 3.25 per cent, after easing in May, June and October.
JP Morgan economist Tom Kennedy said evidence of slowing growth in Australia would be likely to push them over the line.
"We've had data showing that growth really is weak in capex (capital expenditure)," he said.
"And everything else we've got, including retail sales, construction work done, and government spending, has all pointed to a weak third quarter GDP (gross domestic product) print."
He added that although GDP data wasn't released until the day after the RBA decision, speculation of a weak number could influence a cut.
The fact that the RBA did not meet again until February was also a factor, Mr Kennedy said.
"Between drinks, it's going to be quite a long time for them, if things were to deteriorate internationally," he said.
"We've got the US fiscal cliff, which will come into play during the break, we also have potential for the situation in Europe to flare up as well."
The fiscal cliff - a series of tax rises and spending cuts due to start in early 2013 - is a key challenge for the US government heading into Christmas.
Macquarie chief economist Richard Gibbs said a lack of confidence among Aussie businesses would be an added concern for the central bank.
"Business sentiment is at a very low ebb," he said.
"Hopefully that's going to be assisted by some interest rate reductions.
"I don't think a bounce in consumer sentiment should be seen as an impediment to cut - at the end of the day, it's about the business demand in the economy, which is going to feed into factors like employment for 2013."
But St George chief economist Hans Kunnen said that with previous cuts in May, June and October boosting consumer sentiment, and with few international concerns, the bank could remain on hold again.
"We thought they should have done it last month but they didn't, and not a lot has changed," he said.