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Investment Perspectives: A case for Australian interest rates to approach 0%

Since the Reserve Bank of Australia (‘RBA’) moved the official cash rate to 2.5% in August 2013, market and RBA commentators have often speculated when and how the next move will occur.

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For much of 2014, the consensus was interest rates would rise into 2015. More recently, this view changed to more cuts. Last week, a stronger reported CPI divided the commentary. In the end, the RBA decreased rates by 25bps – and so the speculation will begin again.

Quay has no strong opinion on the near term outlook for Australian interest rates. However, by taking the long-view, we believe that there is a compelling argument to suggest Australian interest rates are more likely to approach zero than revert to the long-term average.

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