Market good news continues with interest rate fall highly likely: Economy roundup

The Reserve Bank will make a fourth consecutive cut to the official interest rate next Tuesday, an AAP survey of 18 economists predicts.

The Reserve Bank will make a fourth consecutive cut to the official interest rate next Tuesday, an AAP survey of 18 economists predicts.

The survey shows that all 18 economists surveyed believe the Reserve Bank will cut the official cash rate at its meeting next Tuesday, while 11 say the rate will drop by 75 basis points. This would bring the rate down to 4.5% – the lowest point since June 2002.

But five economists say the RBA will make a 100 basis point cut, which would bring the official rate to 4.25% – the lowest point the official interest rate has ever reached.

The Australian sharemarket has opened higher again this week, following gains in Europe as Wall Street remained closed for the US Thanksgiving holiday.

The benchmark S&P/ASX200 was up 88.3 points or 2.46% to 3676.3 at 12.15 AEDT, while the dollar also remained at the US65 cent mark.

BHP shares rose 5.7% to $30.44, while Westpac also enjoyed a 3.2% rise to $17.28. Commonwealth Bank shares rose 1.8% to $33.34.

Wall Street remained closed overnight for Thanksgiving, while the Bombay Stock Exchange also closed yesterday due to terrorist attacks in Mumbai. It is expected to open later today.

Any relief from lower petrol prices might not last long. The chief economist of the International Energy Agency says global demand for oil will rise in 2010-11 and prices may exceed their July 2008 levels.

“We can see almost every day that projects are being cancelled (due to the financial crisis) and this is bad news… as supply is being withdrawn, but demand will eventually rebound in 2010-2011. We may see prices going even higher than we saw this summer,” Fatih Birol told a seminar in Warsaw.

Oil rose to a record $US147 a barrel in July, but has since dropped, reaching $US54.08 a barrel yesterday.

Meanwhile, the pessimism is spreading in New Zealand. A net 14% of New Zealand companies expect sales and profits to fall over the next 12 months – the lowest reading since April 1988, according to an ANZ report.

A net 21% of companies expect to fire workers, as the nation’s recession has seen the jobless rate rise to a five year high of 4.2% in the third quarter.

“It is abundantly clear that the coming 12 months will be the most challenging this economy has faced in more than two decades,” ANZ national chief economist Cameron Bagrie told The Australian Financial Review.


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