It now seems all but certain that the Reserve Bank will cut interest rates next month, with AMP's senior economist Bob Cunneen predicting the cash rate will drop to 4.0 per cent.
According to Mr Cunneen, the latest retail spending data suggests the Australian economy is flatlining, which should encourage the Reserve Bank to look at rates.
Data from the Australian Bureau of Statistics found retail sales were flat in November – below the market expectation for 0.4 per cent growth.
In year-ended terms, retail sales rose 3.1 per cent, which is well below the long run average of 5.6 per cent year on year.
But while some borrowers will be happy to hear interest rates are still on a downwards trend, RP Data's Cameron Kusher said interest rate cuts shouldn't necessarily be seen as "good news".
"Rate cuts are great for those with a mortgage, because it makes your repayments cheaper. That said, rate cuts also mean that the economy isn't doing so well.
"For people that want to jump into the market it is going to be harder. They will have to have more savings because the LVR on loans will be lower. And, I don't think we will see the reintroduction of the First Buyers Grant Boost."
THE ADVISER
