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MNI EXCLUSIVE: RBA Harper's View Consonant With Lowe Comments

--RBA Lowe Has Said There Are Scenarios That Could Trigger Cut
By Sophia Rodrigues
     SYDNEY (MNI) - The Reserve Bank of Australia thinks interest rates are more
likely to go up than down, but a loss in momentum in household consumption may
be one of the reasons where a cut could happen, according to board member Ian
     Harper told MNI on Friday that his comments are "completely consonant" with
what Governor Philip Lowe said a few days ago.
     In reply to a question "So, the only way is up basically (for interest
rates)?" at Q&A following a speech in Perth on September 21, Lowe said, "No, I
wouldn't say that. There are scenarios where I could imagine having to cut
interest rates. I hope those scenarios don't eventuate though. I think we will
be better off, and people don't like hearing this, but we'll all be better off
if the next move is up rather than down."
     Earlier Lowe said market pricing suggests "it's more likely that interest
rates are going to go up than down. I would agree to that. And ... it's some
time before an interest rate increase is likely to occur and I would agree with
     "More likely the interest rates will go up, and although not for some time,
people should prepare for higher interest rates. They're rising globally, and if
things work out well here, over time -- I'm not saying when -- but over time we
can expect higher rates and, in my own view, that could be a positive
development for the economy," Lowe said.
     In an Insight published Tuesday, MNI wrote the RBA is optimistic after
several recent positive data points but that optimism is tempered by some
headwinds, making it difficult to upgrade the central bank's view on growth and
     The RBA's growth outlook remains supported by a non-mining investment
pickup, strong sentiment on business conditions and a large pipeline of
infrastructure investment. 
     But household spending remains a headwind. 
     To feel more positive about prospects for household spending, real wages
need to grow faster to bring down the household debt-to-income ratio, and
household debt growth has to slow.
     The outlook for household spending took a hit when data published by the
Australian Bureau of Statistics on Thursday showed retail sales fell by a sharp
0.6% m/m in August, matching a pace last seen in March 2013, accompanied by a
downward revision in July sales to -0.2% from a flat outcome originally
--MNI Sydney Bureau; tel: +61 2-9716-5467; email:
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