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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.

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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