The Reserve Bank of Australia will meet again on Tuesday when they are expected to leave interest rates on hold for at least one more month. What happens beyond that however is less clear.
Indeed, many would argue that now is the time for action. Global equities have experienced a volatile start to the year amid uncertainty regarding commodity prices and the strength of China's economy, while fears have also spread regarding the health of Australia's own property market – particularly in Sydney and Melbourne – following reports of a 'Big Short' situation close to home.
In its most recent meeting last month, the board said:
"Over the period ahead, new information should allow the Board to judge whether the recent improvement in labour market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand. Continued low inflation may provide scope for easier policy, should that be appropriate to lend support to demand."
Tomorrow's Decision
Although it left the door open to further cuts should they become necessary, a Fairfax survey of 10 economists found consensus that the cash rate would remain unchanged on Tuesday, as reported by The Australian Financial Review. It's been stuck at a record low of 2% since May 2015 which marked the second interest rate cut in the space of three months (they were cut from 2.5% in February 2015).
The RBA's own interest rate indicator shows just a 6% chance of a 25 basis point cut, compared to a 94% chance that it will remain unchanged, which suggests those 10 economists will be proven correct.
The Outlook
While that may be the case, economists appear less certain regarding the direction of interest rates for the remainder of 2016, with many predicting at least one cut before the end of the year to 1.75%. According to The AFR, AMP Capital's chief economist Shane Oliver and HSBC's Paul Bloxham are amongst those predicting such a move.
At the very least, the Australian economy could benefit from a weaker Australian dollar which would likely come about from another interest rate cut.
While there are many predicting another cut, very few are suggesting the RBA will move to hike interest rates in the foreseeable future. Of course, that isn't ideal for families with their cash tied up in government bonds or savings accounts, but it would be great for investors in high-yield dividend shares.
The Best Dividend Shares to Buy
There has been plenty of talk recently about the sustainability of the dividends paid by certain blue chip shares. Indeed, BHP Billiton Limited (ASX: BHP) and Woolworths Limited (ASX: WOW) have already cut theirs, while those paid by others such as Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) could also be at risk.
While these companies have traditionally been known to pay the most reliable dividends, there are others that I believe could provide an even more reliable stream of income as well as decent capital gains. Retail Food Group Limited (ASX: RFG) and Telstra Corporation Ltd (ASX: TLS) are among the best, while Wesfarmers Ltd (ASX: WES) could also make for a solid bet for long-term investors.
