Whilst most economists and market commentators agree that the Reserve Bank of Australia is likely to cut rates next month and some expect another cut in the months that follow, one leading economist thinks that the central bank will go even further.
Mr Evans has brought forward his forecasts for two cuts in August and November to June and August and then added a third cut in November. This would bring the cash rate down to a lowly 0.75%.
He advised: “Our forecasts for employment, wages growth, economic growth, inflation and conditions in the housing market are consistent with the need for policy to ease through the full course of 2019.”
As a result, “Westpac is now forecasting three cuts in 2019 in June; August and November to push the cash rate from 1.5% to 0.75% and to hold at that level through 2020.”
Whilst this would be great news for borrowers, it will be bad news for income investors as the interest rates on savings accounts and term deposits are likely to come under pressure.
But don’t panic just yet. Firstly, there’s no guarantee that the Reserve Bank will go ahead with this and, if it does, there are ways to beat low interest rates.
The best way in my opinion is taking advantage of the high number of quality dividend shares that the Australian share market has to offer.
For example, the shares of self-storage giant National Storage REIT (ASX: NSR), agriculture-focused property group Rural Funds Group (ASX: RFF), and diversified retailer Super Retail Group Ltd (ASX: SUL) all provide above-average dividend yields and have positive long-term outlooks.
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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended National Storage REIT. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.