This Week's Data Crucial To Rate Cut

The Age

Monday November 27, 1995

LISA KEARNS

The release of a slew of key domestic economic data this week could hold the key to the likelihood and timing of a cut in official interest rates.

Dealers and brokers will scour the data which include national accounts, balance of payments, building approvals and retail trade for signs of a continuing slowdown in the economy.

Bond and stock markets are expected to welcome any statistical evidence of continued economic sluggishness, but the currency markets are set to greet any slowdown with trepidation. Some argue that Australia needs to maintain higher interest rates than comparable economies to attract capital.

A Macquarie Bank weekly economic report said this week's data would be crucial in assessing the outlook for interest rates. Unexpectedly weak non-farm gross domestic product figures combined with weak partial indicators for the December quarter would bolster the case for an easing, the Macquarie report said.

The outlook for the commodity price-sensitive currency was not helped by a decidedly sober appraisal of global commodity prices in the International Commodity Price Review, put together by Dresdner Australia and the National Farmers Federation.

The Dresdner/NFF index is now almost 3 per cent below the level of this time last year.

``Growth forecasts are being revised down in Germany and France and the risks of a more marked softening in the US have increased," the NFF's director of economic research, Mr Paul Brennan, said. ``Leading indicators do not point to any rebound in the short term."

Shares and 30-year US Treasury bonds strengthened in the United States on Friday night. The Dow Jones Industrial Average bounced 7.23 points higher to yet another record close at 5048.84 points, after the All Ordinaries Index inched ahead by 0.4 points to 2151 points.