Homebuyers and businesses are in line for an early Christmas present after the Reserve Bank clearly signalled an interest rate cut is on the way.
Both in the minutes of its November board meeting and in a speech by governor Glenn Stevens last night, the bank indicated it has at least one more rate cut to deliver.
The bank has sliced rates 1.5 percentage points since last year but it disappointed many borrowers when it left rates on hold this month. Mr Stevens told the Committee for Economic Development of Australia that the decision was driven by a sign of improvement in the US and China plus a small rise in domestic inflation pressures.
But he said the board "felt that further easing might be required over time".
Markets and economists jumped on the words, with expectations the bank would use its meeting on December 4 to cut rates another quarter percentage point. Such a reduction, if passed on in full, would save someone with a $300,000 mortgage about $50 a month.
HSBC chief economist Paul Bloxham said though the slight increase in inflation had stayed the Reserve's hand this month, waiting for another inflation report before delivering a further cut was unlikely.
"February is a long time away and with inflation around the middle of the target band, it is hard to argue that it is a problem," he said.Mr Stevens used his speech to warn the days of easy cash, both for miners and retailers, were coming to an end.
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