It is unlikely that interest rates are going to be cut further in the New Year which is good news for the economy though borrowers are unlikely to be pleased. According to a poll of economists conducted by AAP the Australian central bank will not make further rate cuts in the immediate future with only eight of 14 surveyed saying they expect a cut next year. The mining investment cycle is either near or at its peak, and other parts of the economy are now starting to recover and play an important role in driving the Australian economy. Paul Brennan of Citigroup says the rated cuts have helped in rebalancing the Australian economy. “The RBA’s previous assessment that the influence of previous interest rates cuts working through the economy still holds true and there is data to show that domestic expenditure is slowly improving. Housing and equity markets and measures of sentiment have either remained largely stable or strengthened further.� Mr. Brennan said. The Economy Is Improving During the September quarter capital expenditure figures were stronger than expected which Mr. Brennan says suggests that investment in mining will remain robust for some time yet. Paul Bloxham of HSBC says the falling exchange rate was a much needed boost for the domestic economy and removes the need for a further rate cut from the Reserve Bank of Australia. Over the last six weeks the Aussie dollar has fallen steadily and has lost 6 US cents since the end of October. The central bank governor has said in his view the Australian dollar is still above levels he expect in the medium term. Mr. Bloxham added that as new resource projects come online, both mineral exports and housing will be the key drivers for the Australian economy next year. “We expect the housing boom to continue as low interest rates continue to provide support. The recent pickup in consumer confidence is expected to translate into a modest pickup in household consumption.� Mr. Bloxham said.

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