Daily Commentary BY THE CURVE TEAM –

RBA Upgrade Forecasts

10th of May, 2021

The statement on monetary policy for May was released on Friday and contained updated economic forecasts.

Unsurprisingly, employment forecasts were upgraded substantially. The base forecast is now ahead of the upside forecasts from February, with unemployment of 5% expected by the end of the year and 4.5% by mid 2023.

The upside scenario has unemployment at 3.75% by mid 2023. Inflation and growth on the other hand were upgraded to a lesser extent.

Both are expected to spike this year before dropping back. GDP is expected to be 4% by mid 2022 and 3% by mid 2023. Inflation is expected to be 1.5% by the end of 2022 and 2% by mid 2023.

These forecasts inform the RBA’s expectation that the cash rate will not rise until 2024 at the earliest. These will be fleshed out in more detail when Curve release our monthly insights for May tomorrow.

Also this week is the federal budget tomorrow night. This is expected to remain supportive for the economy.

The latest updates for retail sales and business confidence and conditions are released today.

Josh Stewart

Associate - Money Markets