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RBA lowers its GDP forecasts substantially

Its been a busy week from the RBA, now its the February 2019 SoMP

The RBA has taken an axe to its GDP forecasts

  • Probability of rate rise or cut more evenly balanced than previously
  • board does not see strong case to move rates in the near term
  • board judges progress on inflation, unemployment can be “reasonably expected”
  • if progress is made, higher rates would be appropriate at some point
  • might lower rates if there was a sustained rise in unemployment, too low inflation
  • resilience of household consumption is a “key uncertainty”
  • unsure whether income growth will rise enough to offset drag from falling house prices
  • household reaction to fall in home prices is a “significant uncertainty”
  • cuts GDP forecasts, sees 2.8 pct y/y Dec 2018, 3.0 pct Dec 2019, 2.7 pct Dec 2020, 2.7 pct June 2021
  • lowers inflation forecasts, trimmed mean at 2.0 pct y/y Dec 2019, 2.1 pct Dec 2020, 2.2 pct June 2021
  • sees unemployment at 5.0 pct Dec 2019, 4.9 pct Dec 2020, 4.8 pct June 2021
  • sees wage price index 2.4 pct y/y Dec 2018, 2.5 pct Dec 2019, 2.6 pct Dec 2020, 2.6 pct June 2021
  • labour market remains strong, leading indicators imply above average growth
  • housing credit conditions tighter than have been for some time
  • little evidence tighter credit was main cause of slowdown in home loans
  • dwelling investment could fall off earlier and faster than previously projected
  • outlook for business investment positive, see y/y growth 4.8 pct Dec 2019, 4.9 pct Dec 2020
  • recent downturn in business surveys, if sustained, would imply weaker investment, employment
  • global growth running at solid pace, growth in trade partners seen around trend
  • China indicators suggest more pronounced slowing in momentum there

Headlines via Reuters 

more to come  


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