Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, notes that the Australia’s Q1 GDP was more or less as expected by the market at +0.4% q/q, and the biggest contributors to growth were public spending and net exports at +0.2%pts each.
Key Quotes
“Annual GDP growth stepped down from 2.4% to 1.8% due to base effects from a strong Q1 2018. Nevertheless, the RBA in May looked for 1.7% y/y by mid-year, and so remains on track.”
“July OIS is 33% priced for another 25bp cut, and August is currently 79%. The RBA yesterday delivered the widely anticipated cut to 1.25%, but analyst views vary widely as to what the year end cash rate will be.”
“We favour a pause at 1.25% for the RBA to assess the impact of the June cut as well as determine exactly what fiscal stimulus is coming down the pipe, and how this combination impacts the economic outlook.”
“As our tracking for Q2 trim mean inflation is 1.5% y/y, this supports our view of a follow-up cut in August to 1%.”
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