RBA Updates Forecasts

12th of August, 2019

The RBA’s Quarterly Statement on Monetary Policy upgrades growth forecasts.

On a big day for updates by the RBA, Friday saw both Governor Lowe’s testimony before a parliamentary committee and release of the quarterly SoMP. In what are critical updates to the outlook, the RBA slightly upgraded their forecasts to growth in the outer years of the forecast horizon.

With growth now expect to run at 0.7% quarterly for this FY and hit 3.0% by June 2021, the RBA has certainly factored in a large uplift to growth due to the stimulus already applied through tax cuts and RBA cash rate adjustments. Further to this, under their technical assumptions for the cash rate following market pricing, it appears increasingly likely we will see further cuts towards the end of this year in order to get CPI inside their target band by June 2020.

One key risk to the outlook outlined by the RBA is further deterioration in the US China trade conflict. One the very same day the RBA outline their concerns about this, conflicting statements from within the US Administration further muddied the water about the US intention to meet with the Chinese in September. Should they not meet, it could lead to a protracted period of lacklustre global growth and further volatility in financial markets.

Matthew Dunshea

Client Relationship Manager