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POLL-Australia awaits first in series of rate cuts
SYDNEY, Aug 29 (Reuters) - Australia's debt-laden households can count on the first cut in interest rates in seven years next week, say economists, and likely a few more over coming months. A Reuters poll of 20 analysts found all but one expected the Reserve Bank of Australia (RBA) to trim its key cash rate 25 basis points to 7.0 percent at its monthly policy meeting on Sept. 2. 'The days of the inscrutable central banker are gone. The RBA has signalled an intention to cut interest rates,' said Michael Blythe, chief economist at Commonwealth Bank. 'We expect a 25 basis point cut as a first instalment in a rate cut cycle.' The survey's median forecast was for another cut to 6.75 percent by Christmas and further easing to 6.25 percent within 12 months, though opinions varied widely given deep uncertainty over the global economic outlook. Rory Robertson, interest rate strategist at Macquarie, argues that official rates might even need to be cut to 5 percent or less should the global credit crunch keep putting upward pressure on commercial bank lending rates. While the RBA has lifted its cash rate by 100 basis points in the past year, commercial banks raised their mortgage rates by 150 basis points to cover sharply higher funding costs. 'Once the RBA formally decides that average lending rates across the economy should be lower, it will cut its cash rate,' said Robertson. 'After that, if it still thinks average lending rates are too high, it will cut again. And so on.' 'Ultimately it will cut by whatever amount is required to reduce average lending rates to the level it desires,' he added. Tuesday's rate decision will come just a day before government data are expected to show the Australian economy grew only a subdued 0.4 percent in the second quarter, compared to 0.6 percent in the first quarter. Consumption and housing likely slumped under the weight of rising living costs, offsetting strength in exports and business investment. Annual growth in gross domestic product (GDP) should slow to 2.9 percent, from 3.6 percent the previous quarter. The central bank itself expects growth of 2 percent for all of 2008, picking up only slightly to 2.25 percent next year. Other figures out next week should show a sharp narrowing in the current account deficit as huge price increases for Australia's iron ore and coal exports boost the trade account. The same price increases should also boost mining profits in the second quarter, with some analysts predicting overall company profit growth of 10 percent or more. --------------------------------------------------------------- Economists were asked what level the RBA would set its cash rate at after Tuesday's policy meeting? What would the cash rate be at the end of 2008 and in 12 months time? --------------------------------------------------------------- Cash rate End 2008 12 months ABN AMRO 7.0 6.75 6.0 ANZ 7.0 6.75 6.25 Barclays 7.0 n/a n/a Citi 7.0 6.75 6.5 CBA 7.0 6.75 6.75 4Cast 7.0 6.5 5.75 GSJBW 7.0 6.75 6.25 ICAP 7.0 6.75 6.5 JP Morgan 7.0 6.75 6.25 Lehman 7.0 n/a n/a Macquarie 7.0 6.5 6.0 Merrill 7.0 6.75 6.25 NAB 7.0 6.75 6.0 Nomura 7.0 6.5 6.25 RBC 7.0 6.75 6.25 St George 7.0 6.75 6.5 Suncorp 7.25 7.25 7.25 TDSec 7.0 6.5 6.0 UBS 7.0 6.75 6.25 Westpac 7.0 6.5 6.0 --------------------------------------------------------------- Low 7.0 6.5 5.75 High 7.25 7.25 7.25 Average 7.0 6.75 6.25 Median 7.0 6.75 6.25 --------------------------------------------------------------- (Editing by James Thornhill) . lw COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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