Australia: Unchanged forecasts with low rates expected to persist – NAB

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Gareth Spence, senior economist at National Australia Bank, suggests that their forecasts for Australia’s growth, inflation and the labour market are unchanged.

Key Quotes

“We expect a small improvement in growth, but for growth to remain below trend. Alongside below-trend growth we expect the labour market to deteriorate slightly, with the unemployment rate edging higher and measures of labour underutilisation remaining elevated. Inflation is likely to remain weak, with little wage pressure and strong competition keeping a lid on prices domestically.”

“With these predictions largely a continuation of recent trends, it is likely that we will see a further reduction in interest rates by the RBA. While the RBA has now lowered rates three times this year, taking the cash rate to a record low of 0.75%, we think that further stimulus will be required to support the economy, given the private sector remains weak and heightened global uncertainty poses significant risk.”

“We have pencilled in a further cut in the cash rate of 25bps in December taking rates to a new low of 0.5%, but see a risk that a further cut to 0.25% and unconventional policy in H1 2020 will be required should downside risk materialise and more significant fiscal stimulus fail to eventuate.”

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