Is a rate cut imminent

There has been growing speculation around whether the Reserve Bank will cut rates to stimulate growth following a downturn in the housing market. It is somewhat ironic that it was not so long ago that the housing market was thought to be in a bubble and the reserve needed to "do something". In fact, by doing nothing market forces, the banking royal commission, tightening lending standards and stagnate wage growth are doing the job for them. Melbourne and Sydney are retreating from stellar highs whilst the number of days to sell in more regional areas are slowly growing.

There are a number of respected economists, Bill Evans from Westpac being one of the notables who are starting to make noise about cutting rates. The reserve bank itself is calling on employers to increase wages of employees to "do their bit" in stimulating economic growth.

In federal politics the ALP would appear strong favourites to win the election on an "increase wages to workers" and "penalise the rich" tax platform that I would consider somewhat short sighted and anti business in a global marketplace.

Meanwhile globally, the US continues to appear mired in domestic issues with their president, the UK is looking likely to suffer a hard no deal Brexit due to an inability to agree with itself, and Europe is retarded by the uncertainty surrounding will they exit or won't they and what does it mean anyway.

In this backdrop, I don't think the Reserve will do anything at all. A rate rise would almost certainly cause a recession or recession like symptoms. A rate cut will likely lead to debt retirement or saving and be generally unsuccessfully stimulating growth. Rates on hold directs attention to governments near and far to lead and look over the horizon in planning for longer than the next 7 second news grab.

Families would be well advised to live within their means, work through their household spending line by line to reduce wastage wherever possible, be present in their relationships and reduce their impression that success is based on material possessions. Watch the sunset, giggle with the kids and do some exercise. All three will be much more beneficial than sitting on the couch with the heating going watching the "bad news" on TV.

Kind regards

Clinton