| 10.01,12. 03:53 AM |
Interest rates ready to plunge further
January 10, 2012
FAMILIES can look forward to more interest rate cuts this year - possibly starting next month - analysts say.
Although consecutive monthly interest rate cuts last year appeared to lift new home sales, flat retail sales in November could spur the Reserve Bank to cut rates again.
But the outlook for staff at the big four banks is not good. Facing stalling profit growth and rising borrowing costs, the banks are expected to shed thousands of jobs this year.
They are said to be looking at staff costs, which account for nearly 60 per cent of the $32 billion they spend each year. The banks made $24.2 billion in profits last financial year, an increase of 11.5 per cent on 2010.
Commonwealth Bank is believed to be planning to cut costs by 10 per cent this year, analysts expect Westpac to shed 1600 jobs, and ANZ is believed to have started work on a new redundancy program.
Of interest rates, HSBC's chief economist Paul Bloxham said Australian Bureau of Statistics figures showing retail turnover was up only slightly to $20.933 billion for November would give focus to the Reserve's next interest rate decisions.
Rates were cut in November and December, bringing the cash rate to a "neutral" setting of 4.25 per cent.
"We expect further RBA cuts in the first quarter of this year," he said.
"With rates now slightly below neutral and further rate cuts expected in the first quarter, we expect some improvement in the retail sector this year."
Futures markets are betting there will be a big fall in interest rates - 100 basis points - to a low of 3.25 per cent by August.
The RBA does not meet this month but most economists expect a cut at the first meeting for the year next month.
This will give the construction sector another lift after home sales in November increased by 6.8 per cent after hitting an 11-year low in September.
Detached housing sales in Victoria rose by 11.6 per cent although multi-unit sales fell 17 per cent.
Falling rates and a competitive building market made it a good time to build, said Housing Industry Association chief economist Harley Dale.
"There is, however, a long way to go to restore new home sales volumes to acceptable levels."
- Additional reporting Phil Jacob