1 Aug 2013
Flash: RBA poised for ambitious future? – NAB
FXstreet.com (New York) - Throughout this year we have been pointing to the ongoing sources of weak domestic demand as the economy faces a downturn in mining investment, notes the NAB Research Team.
Key quotes
“Until yesterday, the RBA had been expressing optimism about other drivers of growth picking up. Recently, Glenn Stevens provided a much more sober and realistic outlook, suggesting that the economy cannot rely on housing and consumption to plug the growth hole. This is in line with our forecasts and suggests that having recognized the reality of lower growth with benign inflation more rate cuts are likely.”
“We had already been forecasting a 25bps rate cut in August to 2.5% and with the Governor giving the green light for lower interest rates this now looks a sure thing. We now also expect an additional 25bps cut to 2.25% before year-end – most likely in November after the Q3 CPI although it could be earlier.”
“Beyond this, we expect the Australian economy will continue to grow below trend, income growth to be weak, and the unemployment rate to rise to and possibly above 6.25%. So the RBA will retain a bias to ease well into 2014 and a cash rate below 2.25% remains a real possibility.”
Key quotes
“Until yesterday, the RBA had been expressing optimism about other drivers of growth picking up. Recently, Glenn Stevens provided a much more sober and realistic outlook, suggesting that the economy cannot rely on housing and consumption to plug the growth hole. This is in line with our forecasts and suggests that having recognized the reality of lower growth with benign inflation more rate cuts are likely.”
“We had already been forecasting a 25bps rate cut in August to 2.5% and with the Governor giving the green light for lower interest rates this now looks a sure thing. We now also expect an additional 25bps cut to 2.25% before year-end – most likely in November after the Q3 CPI although it could be earlier.”
“Beyond this, we expect the Australian economy will continue to grow below trend, income growth to be weak, and the unemployment rate to rise to and possibly above 6.25%. So the RBA will retain a bias to ease well into 2014 and a cash rate below 2.25% remains a real possibility.”