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Bill Evans, chief economist at Westpac, points out that the RBA has decided to leave the Cash Rate unchanged at 1.50% and in addition, changes to the Governor’s Statement were minimal with the issues around growth developments and the housing market still in flux.

Key Quotes

“In this Statement, that downside risk is not mentioned. The Governor does point out that “other indicators suggest growth in the Australian economy slowed over the second half of 2018″. Of course, the extent of this slowing will be revealed in the GDP report which prints at 11:30 am tomorrow.”

“Westpac expects that the six month annualised growth pace in the economy will slow from 4 per cent in 2018 H1 to 1 per cent in 2018 H2. This spectacular slowing, even if at 1.5% in H2, is surely worthy of stronger language than seen in this Statement. It is also no surprise that the Board still forecasts growth around 3 per cent this year. Any change will only be made following the May Board meeting.”

“We have to recognise that the Statement today is slightly more upbeat than we saw in February. As we later found out, the Board decided in February to restate the risks around interest rates to be more symmetric than had been the consistent practice through 2018. Perhaps, that significant change required strong language, whereas today, despite no real encouragement from the data, it was considered more appropriate to be circumspect.”

“Westpac confirms its view that the RBA Board will decide to cut rates by 25bps in both August and November 2019.”