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Interest rates set to plunge: economist

Interest rates set to plunge: economist

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Staff Reporter

Interest rates will fall another 100 basis points this year, a senior economist has claimed.

Westpac senior economist Bill Evans expects the official rate will drop to 2.75 per cent - down from 3.75 per cent currently - by December, according to a report in The Sydney Morning Herald.

The cut will be made over four installments, the report said.

The Reserve Bank has no excuse not to cut interest rates next week, Real Estate Institute of Australia (REIA) president Pamela Bennett said.

“Retail figures are going nowhere and building approvals have fallen dramatically. It seems everywhere you look outside the mining sector, the economy needs support and the RBA is in a position to do something about it,” Ms Bennett said.

The REIA is calling for another cut to the official cash rate.

“Assuming it was passed on by the commercial lenders, another 25 basis points cut would improve home loan affordability by two and a quarter per cent,” Ms Bennett said.

“That would have an enormous impact on consumer confidence with flow-on effects to business and the economy.”

“The Reserve Bank has an opportunity to restore some of this country’s lost confidence and give those parts of the economy that haven’t benefited from the mining boom the push needed to stimulate demand,” Ms Bennett concluded.

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