After delivering an interest rate cut at the last RBA meeting, Governor Phillip Lowe noted that it was “not unreasonable to expect a lower cash rate” and the market did not have to wait long, with the RBA cutting the official cash rate by 0.25% to 1% at its July meeting.

The RBA is targeting business investment to lower unemployment with these rate cuts, as a tighter labour market is needed to support wages growth and household spending.

Given risks to growth, Macquarie has revised down its expectations for interest rates here in Australia. Notwithstanding a likely pause by the RBA to see if recent cuts gain traction, we see official interest rates going as low as 0.5% by the end of 2021.