A global wealth manager has predicted the Reserve Bank of Australia (RBA) will not raise the official interest rate in the immediate future and will instead wait to see what happens to the economy in the medium term before taking any further action.
Wilson Asset Management lead portfolio manager Matthew Haupt noted the Australian economy is currently in a slowdown phase that will allow the RBA to hold off implementing another interest rate increase.
“The feedback we are getting on the ground is that people are cutting back [on their] spending and that will be an important factor on why we think the RBA won’t raise rates,” Haupt told delegates at the SMSF Association Technical Summit 2024 held in Sydney recently.
“We think the RBA really wants to sit back and watch what happens and the reason why we say that is we think it probably should have raised rates sooner and higher but [it didn’t].
“But what it’s done now is given itself some runway not to raise rates. So it will increase its inflation forecasts out into the future and FY2026 is when it expects [inflation] to run off and go back towards its target.”
He pointed out the situation will not prevent the RBA from discussing the idea of a further rate rise, but this does not mean it will take this course of action.
According to Haupt, the current state of the economy means individuals should be targeting particular sectors for their share portfolio allocations.
“In a slowdown phase you’ve really got to hunt around defensive sectors. So that’s healthcare, staples and utilities. Some growth [sectors] work in slowdown phase as well,” he said.
“But it is really early on and we think the slowdown phase will play out over the next three to six months.”
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