RBA too optimistic about the economy – Westpac


According to Sean Callow, analyst at Westpac, even though the RBA has cut its growth forecasts in the Feb SoMP, but in their view, they are still too optimistic. 

Key Quotes

“As the housing downturn deepens, the pressure on the highly indebted consumer will grow, while the fall in residential construction is likely to be deeper than previously thought. Westpac Economics has cut its growth forecast to just 2.2% in 2019 and 2020, which is low enough to lower interest rates.”

“Westpac now expects the RBA to cut the cash rate in Aug and Nov 2019. This forecast rattled AUD/USD, knocking it down 0.6c. Yet global factors are somewhat supportive for the Aussie.”

“CNH is the strongest Asian currency over the week as the structure of a US-China trade agreement is revealed. This is very helpful background for AUD, as is the resilience of key commodity prices such as iron ore and coking coal. Barring a hawkish surprise from Fed chair Powell’s semi-annual testimony, AUD/USD should probe the upper end of this month’s ranges.”

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