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David Plank, Head of Australian Economics at Australia and New Zealand Banking Group (ANZ) said that the Reserve Bank of Australia (RBA) Board kept the cash rate at 0.75% in February. But the big surprise was the description of the growth outlook.

Key Quotes:

“The central scenario is for the Australian economy to grow by around 2¾ per cent this year and 3 per cent next year, which would be a step up from the growth rates over the past two years.

This is unchanged from the central scenario presented in the last forecast update in November. It is possible that the numbers to be published in Friday’s Statement on Monetary Policy (SoMP) will reveal some impact from the bushfires and coronavirus, but the initial assessment is modest enough to allow the RBA to leave its presentation of the central scenario unchanged.

We will no doubt see a much fuller discussion of the risks posed by the bushfires and the coronavirus in the SoMP. We also except the Governor to spend considerable time discussing these risks in his speech on The Year Ahead to the Press Club in Sydney on 5 February.

It seems highly likely to us that the RBA’s perhaps understandably cautious assessment of these risks is about to be overtaken by “events, dear boy, events”, to steal a phrase attributed to the former British Prime Minister, Harold Macmillan. The question is when this will become clear.”