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Bill Evans, analyst at Westpac, suggests that they are announcing an adjustment to the Australia’s rate profile forecast to bring forward the first cut to the June RBA’s Board meeting with the second cut to follow in August.

Key Quotes

“We then expect the cash rate to remain on hold through 2020.”

“This change in forecast reflects the lift in the unemployment rate for April from 5.1% to 5.2% and the confirmation from the Governor that the Board would be closely following developments in the labour   market with the primary focus on the unemployment rate.”

“The Governor’s thinking has evolved over the year to accept that, as we have observed in other countries, upside inflation risks are consistent with a lower unemployment rate than had previously been assessed. For Australia the Bank had believed that the key unemployment rate was 5% – he now accepts that he can drive the economy harder with an associated lower unemployment rate without risking any inflation overshoot.”

“With the June rate cut virtually locked in the issue is why we expect a follow up move in August.”

“We also expect that the March quarter GDP report (released June 5) will confirm the Bank’s recent downbeat assessment of the consumer (consumer spending growth in 2019 revised down from 2.5% in February to 2.0% in May) and note that the May Minutes see downside risks to the consumption forecasts.”