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My tip on today’s rate rise and a few GGs in today’s Melbourne Cup!

Peter Switzer
1 November 2022

It’s Cup Day so let’s keep it horsey by doing the form on the economy and the RBA to see what’s likely to salute the judge at 2.30pm, when Dr Phil Lowe lets us know how much money he and the banks will take off borrowers going forward.

Remember, the RBA is a winner if it gets inflation down. Until last week’s 7.3% inflation reading, it looked like the central bank was in good form. Last month the economy looked like it was set to see inflation fall, and that’s why Dr Phil gave a 0.25% rate rise when many expected a 0.5% hike.

Now form expert i.e. Westpac’s chief economist, Bill Evans says the RBA is likely to raise rates by 0.5% today. And another form expert, the economics team at Barrenjoey, is also tipping a half-a-percent rate rise today.

Right now the RBA’s track record is patchy and its rate rise scare campaign isn’t having a huge impact right now. But we are relying on unreliable monthly statistics that can often be slow to tell the truth about what’s going on in the economy now.

That said, the following could make the RBA raise the cash rate today by 0.5%:

• Inflation at 7.3%.

• Business inflation at 24-year highs.

• Business lending surged to 14.7% annual growth in September.

• Retail trade rose by 0.6% in September to record highs of $35.1 billion. Spending was up 17.9% on the year. 

Against this, consumer confidence is low. The ANZ-Roy Morgan Consumer Confidence reading fell 1.1 points to 81.1 this week and is now a large 25.7 points below the same week a year ago. In addition, Consumer Confidence is now 9 points below the 2022 weekly average of 90.1.

Meanwhile, house prices are diving. “Since peaking in June, Brisbane house prices have dropped by 6.2 per cent, Sydney’s have plummeted by 10.2 per cent since peaking this January and Melbourne’s declined by 6.4 per cent since hitting their peak in February,” CoreLogic reports.

It will be a close finish and I’d prefer another 0.25% rate rise, but 0.5% could get up on the line with Dr Phil possibly wanting to give us one big scare before pausing on rate rises.

The Cup form I prefer tipping stocks and particularly what stock market indexes will do, but today is Cup Day so I’ve done the form on the race that stops a nation. Best Pommie horse is the favourite Deauville Legend. Duais is trained by a Bart Cummings’ grandson, so it will be ready. Montefilia beat last year’s winner, Very Elegant in 2021, so it has quality, while Smokin Romans was the Caulfield Cup favourite and had no luck. That said, stocks are a lot easier and even if you lose by seeing your share price fall, you still get a dividend! Horses are less generous!

The Cup form

I prefer tipping stocks and particularly what stock market indexes will do, but today is Cup Day so I’ve done the form on the race that stops a nation. Best Pommie horse is the favourite Deauville Legend. Duais is trained by a Bart Cummings’ grandson, so it will be ready. Montefilia beat last year’s winner, Very Elegant in 2021, so it has quality, while Smokin Romans was the Caulfield Cup favourite and had no luck. That said, stocks are a lot easier and even if you lose by seeing your share price fall, you still get a dividend! Horses are less generous!

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