Rates will probably be cut to 0.75% in October

The continued rise in the unemployment rate will probably prompt the Reserve Bank of Australia to cut interest rates to a fresh low of 0.75% at its meeting on Tuesday 1st October. And given that slack in the labour market is set to increase further, we expect rates to fall to 0.5% before year-end. But with monetary policy now firing on all cylinders, the necessity of unconventional policy is diminishing.