Why we now expect the RBA to cut rates

Australia’s housing downturn is deepening. Prices will probably fall by more than we had previously anticipated and the drag from falling dwellings investment will be larger. The experience from housing downturns in other advanced economies is that central banks nearly always end up cutting policy rates. We think that Australia’s current downturn will be no exception and now expect the Reserve Bank of Australia to lower rates to 1% by the middle of next year.