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By Per Amundsen, Head of Research, Thinktank
With the cash rate at a new record low, the search for income-bearing securities becomes even more imperative. In a series of four articles, boutique fund manager and specialist commercial property lender, Thinktank, looks at the options.
It’s official. Last Tuesday (June 4), Reserve Bank Governor Philip Lowe announced a 25basis point cut in the cash rate, pushing it down to 1.25%; the first cut in official interest rates since August 2016 and a new historic low. And there’s plenty of smart money saying it will be just 1% by Christmas.
As the Governor foreshadowed in a speech in May, inflation is not an issue, with the central bank hoping the lower rate will give a limping economy a shot in the arm. The bank is forecasting economic growth to increase from the current 2.3% to 2.75% by year-end and a fairly steady unemployment rate to stay around 5%.
To quote the Governor, 2.75% “is supported by increased investment in infrastructure and a pick-up in activity in the resources sector”. But, and it’s a major but, “the main domestic uncertainty continues to be the outlook for household consumption, which is being affected by a protracted period of low-income growth and declining housing prices”.