Although we still believe that the next move in interest rates in Australia will be down, it is useful to consider what would need to happen to prompt the RBA to raise rates. Two scenarios stand out. The first is where the strong global economy and the high level of commodity prices help Australia shake off the malaise of recent years and trigger a marked rebound in underlying inflation. The second is where the RBA gets so worried about financial stability that it uses higher interest rates to tame the housing market.
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