SYDNEY - Australia's central bank will keep rates at record lows until at least early 2021, a Reuters poll showed, with an increasing number of analysts either predicting a cut or pushing back their rate hike calls in the face of rising economic risks.
A recent run of soft economic data at home, and the pressure on overall output from falling home prices and slowing consumer spending prompted the Reserve Bank of Australia (RBA) this month to shift to a neutral stance from its previous tightening bias.
Economists followed suit, with every single one of the 41 polled now predicting the cash rate at a record low 1.50 percent this year compared with three who had expected one 25-basis-point hike by end-2019.
The RBA has kept policy unchanged since last easing in August 2016, with a median of 28 economists seeing this record stretch of steady rates extending at least until the first quarter of 2021.
"For the rates outlook, the course of the economy will drive whether the RBA manages to hold rates steady for a while, or, as the risk has grown in recent months, the RBA cuts again," National Australia Bank economist David de Garis said.
"If there is a move this year, it’s more likely to be an easing in policy."
Indeed, as many as 10 of 37 economists polled expect at least one cut by the end of next year compared with seven in the previous poll.
The change in outlook comes as Australia's once high-flying property market nosedives, raising questions over its impact on consumer spending.
If the September quarter is anything to go by, the economy might be in for a rough patch over the coming year. Gross domestic product in that period came in much weaker than expected while retail and car sales - indicators of consumer health - have remained tepid.
With the U.S. Federal Reserve also signalling a pause to its tightening cycle, the market completely wiped out the chance of any RBA hikes over the next two years.
Instead, investors are now pricing in a better-than 50-percent chance rates will be cut by year-end.
(Reporting by Swati Pandey Editing by Shri Navaratnam) ((firstname.lastname@example.org; +61 2 9321 8166; Reuters Messaging: email@example.com; twitter.com/swatisays))