Westpac on yesterday's RBAA Reserve Bank of Australia statement.
If you are a fan of 'Yes, Minister' I encourage you find and read the whole thing.
Anyway, in brief:
- We have been surprised that the Board has retained its growth forecast for 2020 at 2.75% (around trend) given the weaker momentum which was apparent from the September quarter national accounts and developing questions around the global economy.
- It is also somewhat brave, given a range of leading indicators around the labour market, to assume that the recent surprise fall in the unemployment rate over the last two months, from 5.3% to 5.1%, will be sustained.
And:
- uncertainty around the coronavirus poses substantial risks
- certainly the impact of the virus over the course of the first quarter both globally and domestically has to be quite damaging
- seems unlikely that subsequent stimulus policies will be able to fully offset the short term damage done to confidence and activity implying a realistic downward revision to growth forecasts, both globally and domestically.
- Westpac continues to expect that a combination of a more moderate growth outlook and an unexpected (by the RBA) deterioration in the labour market will require a further policy response. Our forecast is that the next rate cut will occur in April followed by a further cut in August.
