Australia’s Biggest Banks Split Over RBA’s Oct. 2 Rate Move

Australia’s four biggest lenders are divided over whether Reserve Bank Governor Glenn Stevens and his board will resume reductions next week in the highest benchmark interest rate among major developed nations.

Westpac Banking Corp. (WBC) Chief Economist Bill Evans and Warren Hogan of Australia & New Zealand Banking Group Ltd. (ANZ) are in the minority predicting policy makers will cut by a quarter percentage point to 3.25 percent at the Oct. 2 meeting, a Bloomberg News survey showed. Commonwealth Bank of Australia (CBA) and National Australia Bank Ltd. are among 19 of 26 economists forecasting a fourth straight monthly pause at 3.5 percent.

“While the more dovish tone of recent RBA pronouncements makes a cut as early as next month quite possible, our judgment is that they will wait a little longer,” NAB Chief Economist Alan Oster said in a Sept. 24 research report. “Commodity prices are higher, including iron ore, the NAB business survey improved somewhat in August, the unemployment rate is lower, we’ve seen a positive response from asset markets to monetary easing right across the U.S., Europe, and Japan, and against all this the Australian dollar is basically unchanged.”

The local currency, trading 30 U.S. cents higher than its average since exchange controls were scrapped in 1983, has gained 1.4 percent since the RBA’s Sept. 4 meeting.

Rate Bets

The survey results contrast with investors who have priced in about an 80 percent chance the RBA will lower the overnight cash rate target by a quarter point next week, according to swaps trading data compiled by Bloomberg.

A slowdown in mining that helped secure 21 recession-free years in Australia has heightened the focus on risks to an economy where consumers have taken on more debt than Americans at the height of the mortgage bubble. Policy makers have signaled confidence they have the tools to cope with any external turbulence -- with room to reduce rates and loosen fiscal policy that is unavailable to most major economies in the developed world.

A government report today showed an Internet job vacancy index for Australia fell 2.9 percent in August from a month earlier, marking the longest stretch of monthly declines in data compiled by Bloomberg since 2006.

The unemployment rate in Australia has hovered near 5 percent for the past 15 months.

To contact the reporters on this story: Daniel Petrie in Sydney at dpetrie5@bloomberg.net; Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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