RBA rate cut: Will they or won’t they in May?

It’s a close call this month, but experts say interest rates are tipped to drop for the second time this year.

If economists are right, the Reserve Bank of Australia will cut rates by a further quarter of a per cent when it meets in May.

A combination of factors point to a likely downward shift in rates, says ANZ senior economist Felicity Emmett.

“It’s looking like more of a line-ball call this month, but we think there will be another drop,” she says.

“The RBA will be thinking that growth is going to stay below trend and if unemployment is going to rise, they may need to cut rates again.”

Slow economic growth was the main driver behind February’s rate cut of 0.25% – its first cut in 18 months. A second rate drop this year could stimulate economic growth and bring Australia into line with monetary policies overseas, says Emmett.

“Rates are at historically low levels, but we’re in a different international environment and when you look internationally, Australia still has a relatively high interest rate structure,” she says.

“So I think the world has changed and we are changing with it.”

A second rate drop this year could bring Australia into line with monetary policies overseas.

A fall in interest rates would make fixed-rate home loans an attractive option for property investors and homeowners, says credit and financial advisor Robert Rollfink from Rockfeather Financial.

“Any property investor would be insane not to get a five-year fixed rate,” he says.

“If you’re a long-term property investor, why wouldn’t you lock it in while money’s cheap?”