THE Reserve Bank surprised few by leaving interest rates on hold this week. But holding steady has fuelled an interesting and significant change in sharemarket and property market thinking - the idea that we have possibly already seen the last interest rate cut in Australia this decade.
There are even suggestions that we didn't need the last two cuts, that interest rates are 50 or 75 basis points too low already. You will notice in the media a stream of economists now winding back their "two more cuts" mantra to one more or perhaps none by the end of the year.
The standard response to this thinking is that the RBA has to cut again to lower the Aussie dollar because it's strangling what's left of our manufacturing base.
But the truth is that it is not the interest-rate differential that dominates our exchange rate, but the relative health of our economy compared with the US and Europe. The RBA can cut Australian rates all it likes but while the Australian economy grows reliably at 3.1 per cent, and the US grows unreliably at 1.5 per cent and Europe at minus 0.6 per cent, it won't make the blindest bit of difference what the central bank does.
The punters won't tell you but they know they can't control the currency - just ask Nigel Lawson and the Bank of England. When it comes to lowering the Australian dollar, the RBA simply has to hope for a US economic recovery and an Australian economic demise. Without that they're stuck pretending and the currency's stuck above parity.
Of course, rates may be cut again here, but the Australian interest-rate debate is a piffling sideshow compared to what is really changing in global investment markets: the idea that interest rates are bottoming globally.
When the US Federal Open Market Committee backed off its rhetoric that interest rates would remain exceptionally low for an extended period of time (until 2015) and replaced it with "interest rates will remain low until the unemployment rate falls to 6.5 per cent", the market twigged that interest rates are not going to stay down forever. Someday, perhaps next year, they may go up again.
It is potentially the biggest market factor to hit us this year because, if true, the bond market suddenly looks like a bubble engineered and manipulated by central bank policy. If rates go up again, the bubble will burst, in which case the bond market is a disaster waiting to happen.
For investors this has manifested itself in a second equally swift move that has caught us all by surprise in the past two months. The bond money has to find a home and equities it is. What more natural spot to put money escaping the prospect of a ravaging in the bond market than to put it in equities, which are not only historically cheap but actually benefit from the economic recovery that the bond market is running away from?
The bond-to-equities switch - or the reversal of equities to bonds, fixed interest and term deposit switch that has been in place since the GFC - is massive in the US, let alone in Australia. If it is fulfilled it will dwarf market hiccups like the dip we had in Europe this week.
What does this mean for you? If rates have bottomed, now's the time to fix your mortgage.
On the flip side, now is the time to avoid locking in a term deposit rate. Now's the time, can you believe it, to take out a margin loan and buy equities. Of course you wouldn't - you're too smart, you went through the debt boom and look where that took us - but logic suggests you should.
There are a lot of "ifs" here, but the trend suggests this is where we are heading, so make the most of it while it lasts.
Meanwhile, if your neighbour turns up with a new boat paid for with "Equity, mate", sell everything. Thankfully some people will never learn.