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Will the RBA cut by 0.5% again on Tuesday?
04 June 2012, 21:45 PM | Source: Ricardo Goncalves, SBS
Since its high point on May 1st, shares are down 10.4 per cent meaning the market has entered into a technical correction. It comes as unemployment rises in both the US and Eurozone.
The latest read on Australia’s unemployment will be released on Thursday. No doubt, the Reserve Bank board will take these latest developments into consideration when it meets tomorrow to discuss interest rates.
The question will not be if the RBA board cuts the official cash rate - but - by how much.
Shane Oliver, AMP Capital Chief Economist expects the RBA to cut the official cash rate by 50 basis points, or 0.5 per cent.
"The global backdrop is worsening, and at the same time, we have seen a run of softer Australian economic data for retail sales, home sales, building approvals, house prices," he said.
Mr Oliver says the RBA should have cut rates last year.
"I think the Reserve Bank made two things wrong here, one is to overestimate the boost to the economy of the mining boom, where a lot of that boost has gone through to imports, and secondly to underestimate the weakness in the non-mining part of the economy".