Reserve likely to cut rates again as exports drop
Reserve likely to cut rates again as exports drop

The Reserve Bank is under pressure to deliver more interest rate cuts after figures showed exports and home sales are collapsing.

As the big four banks again failed to cut their mortgage rates yesterday in response to the Reserve's 0.25 percentage point reduction, expectations grew of follow-up cuts in coming weeks.

Australian Bureau of Statistics figures show the country ran up a $2 billion trade deficit in August.

The much larger than expected shortfall was because of sharp drops in the value of coal, mineral ore and gold exports.

Although the volume of iron ore exports increased 7 per cent in August, their value fell by 6 per cent for the second consecutive month.

In the first two months of the financial year, the country exported $9.7 billion of iron ore.

For the same period last year it exported $11.7 billion.

Australian exports were down 12 per cent over the year compared with imports, which are up more than 5 per cent.

It is not just the export sector struggling under the weight of the strong dollar, which fell half a cent to just above $US1.02 on the trade figures, and lower commodity prices.

New home sales in WA, measured by the Housing Industry Association, fell 9.4 per cent in August.

Despite the steep drop, sales were still 8.1 per cent higher through the three months to the end of August compared with the previous quarter. They are 50 per cent higher than a year ago.

Nationally, sales were down by 5.3 per cent with big falls in NSW (7 per cent) and in Victoria (8.6 per cent). Sales are at their lowest in 15 years, falling more than 17 per cent over the past 12 months.

Association chief economist Harley Dale said more rate cuts would be needed, as well as changes to taxation levels on new homes.

CommSec chief equities economist Craig James said both the housing and trade figures highlighted the dearth of activity across the economy.

"The Reserve Bank looks poised to cut rates once again in November after the next round of inflation data," he said.

The West Australian

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