Interest to be on hold until 2020

In a recent article Shane Oliver – The Head of Investment Strategy and Chief Economist at AMP – has said that he predicts that interest rates in Australia will not rise until 2020. He cited a number of reason for this:

• Economic growth is likely to remain below the RBA desired rate and a premature increase in rates could be detrimental to the economy. The slowing of construction in Sydney and Melbourne will also place a drag on the economy over the next 2 years while debt levels in those areas remains high
• Wages growth and inflation will remain low because the economic growth will not be large enough to take up and excess the market has.
• House prices in Sydney and Melbourne should correct slightly. This combined with poor affordability and rising supply in those areas may push prices down.
• Lending standards are getting even tighter so the access to funding will not be there to be able to drive growth.

Therefore based on the above the thoughts are that interest rates don’t look like rising for quite some time.