Punting on interest rates for the Melbourne Cup 2016

This year’s Melbourne Cup day coincides with a far more significant event in the economic calendar. The Outcome of Reserve Bank Board Meeting, at 2.30pm AEDT, on Tuesday 1st November.

"I wouldn’t bet against an interest rate cut by the Reserve Bank. Sure, inflation is up - a bit - but it is still only 1.3%. The RBA has a 2-3% target, but they have been way below that for an extended period,” says Tim Harcourt. “It will certainly give the economists something to ponder as runners and riders go around the track at Flemington Racecourse in Melbourne just thirty minutes later.”

He argues that the chances of another interest rate cut when the Reserve Bank of Australia meets next week has increased sharply now that the higher dollar has put downward pressure on deflation.

“Core inflation figures, which represents the long run trend in the price level, are closely monitored by the RBA, and are totally benign. Core inflation rose to just 1.5%. There is a lot of room for a cut in rates to boost the economy,” he says.

Tim Harcourt is the JW Nevile Fellow of Economics at the UNSW Business School, and has been monitoring the economy in the run up to what he is calling the “Melbourne Cup Interest Rate race.”

However Tim Harcourt says "home owners and market participants will probably be able to enjoy race day without having to keep too much of an eye on the RBA interest rate move, when the bank it makes its monthly announcement. There will be no chance of a raise - just a cut which may put money in the pocket of a punter who has lost their shirt.”

“Indeed - when you are punting on this year's Melbourne Cup, have a bit of sympathy for Australian export businesses who have to make their big bets on international markets in the Asian region, and gamble with exchange rates, which swing with moves of interest rates. This year, with the impact of Brexit, we’ve seen wilder swings than most."

Northern Hemisphere-bred horses have won 10 of the 16 Melbourne Cups since the turn of the century. “That’s significant too. We may say we are in the Asian Century - but Europe, and the UK, still can give a huge steer to the Australian economy.”

He compares country’s economies to runners in the Melbourne cup.

• Grey Lion, representing Ireland, has a huge long pedigree, but for a long time has been in the doldrums, and is only now picking up, just like the Celtic Tiger economy.
• Beautiful Romance from the UK was once very competitive, but has taken some odd decisions and slumped in the field. Never underestimate this lightly raced staying mare trained out of Newmarket though - she could, like the UK, suddenly overtake the field on her own.
• Current Mirotic is the only Japanese runner being aimed at this year’s Melbourne Cup, but has consistently failed to impress. However she is tough, capable and possesses tactical speed.
• Gallante is will stay the trip and seems ready to deliver on early potential, but has the French habit, like it’s economy, of just sometimes going on strike for no obvious reason.
• Our Ivanhowe, the German-bred import, likes to do solid dependable work, and the stallion can’t understand why the plan falls apart thanks to some unruly European players.
• Secret Number is a real hope for Saeed Bin Suroor from Dubai, a little known but powerful galloper with an industrious approach which has revealed a new appeal to punters in recent years.
• Bondi Beach is a stronger more mature horse now, and just like the Aussie economy has not been in a recession for a long time.

However he says, just enjoy the ride. After all, $374 million is the value the Melbourne Cup in terms of gross economic benefit to the state.

“Whether you are there for the nags, the frocks, the fashion, the networking or just a good time, at the Melbourne Cup you are participating in a truly global, major international sporting event of economic consequence to Australia,” he says.

For further comment call Tim Harcourt on 02 9385 3816, 0408 485 479, or Email tim.harcourt@unsw.edu.au.

Media contacts: Julian Lorkin: 02 9385 9887