An article in the Australian Financial Review (gated):
Goldman Sachs Asset Management’s head of fixed income in Asia-Pacific, Philip Moffitt reasserting his call that the Reserve Bank of Australia may be forced to cut interest rates, even after the US Federal Reserve tightens.
- “The economy otherwise is weak.
- The unemployment rate is rising and the currency still is overvalued.
- So if you had to put a dollar down on a bet, your bet would be that policy needs to be easier rather than tighter”
- Fiscal policy is still reasonably loose, but that – in tandem with slight currency depreciation – only has the effect of pushing out GSAM’s call for a cut to next year from this year
- “The way we’d analyse it is prices are rising but it’s not creating a leverage bubble”
- “The idea that rates are low here from a domestic perspective is absolutely true . . . but benchmarked against the rest of the world we still actually have relatively high interest rates”
- “The demand for Australian assets, particularly fixed income assets for foreigners, is very, very strong”
- “By global standards we’re a high-quality high yielder and if you’re getting paid zero or negative in Europe – you’re actually having to pay the bank to hold your money – 3 per cent on an Aussie sovereign or 3.5 to four on a semi-[government bond] is pretty attractive”
