Bank boss tips ‘at least two’ rate cuts this year

Bank of Queensland chief executive Patrick Allaway says Australia is approaching a potential slump in the global economy from a position of strength, as the bank forecasts at least two interest rate cuts over the rest of this year.

The regional bank reported its half-year earnings on Wednesday following a period of financial market volatility sparked by US President Donald Trump’s trade war, which last led to some of the biggest moves on global markets since the COVID-19 pandemic.

The wild swings on markets have raised fears about the economic fallout from a US-China trade war, sparking speculation the Reserve Bank could move to shield the economy by slashing interest rates.

“What we have seen, over the last couple of months, which I think has been causing volatility in markets and causing repricing of risk, is a potential of dismantling of global trade. Obviously, they stepped back from some of those initiatives, but also potentially a dismantling of globalisation,” Allaway said.

The Australian economy was in a strong position, he said, thanks to the high level of employment, high government spending, and a resilient financial system. But he added that if the global situation led to a quick slowdown in the economy, the Reserve Bank of Australia could help to cushion the economy by cutting interest rates.

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“All things being equal given where the economy is today and given where inflation is, we are forecasting at least two rate cuts through the year, but I’m not going to comment on whether they should or shouldn’t,” he said.

Financial markets are betting the Reserve Bank next month will cut the cash rate from 4.1 per cent to 3.85 per cent, and markets imply there is a 30 per cent chance of a super-sized 0.5 percentage point cut.

The results for BOQ, which is going through a period of major change, showed cash earnings were up 6 per cent, to $183 million, after costs cutting and a move to step back from the competitive mortgage market.