Callam Pickering lines up behind myself, the freshly-minted Kouk and Goldman Sachs in expecting more rate cuts (of course, I’d also install macroprudential tools and cut rates by 50bps):
…the crux of the issue facing the RBA: despite its best efforts, it hasn’t got the timing perfect and there is growing evidence that the economy has peaked too early and may be poorly placed as mining collapses over the next two years.
…With a subdued labour market and consumer confidence plummeting, the outlook for household spending is far from pretty.
…the construction boom — and I use that word lightly — appears set to be fairly short and inconsequential.
This leaves us with exports or, in other words, China…The iron ore price has declined significantly throughout 2014 on the back of more iron ore projects transitioning to the production stage. Coupled with slowing steel demand from China and the outlook for iron ore prices is fairly bleak.
…The RBA should respond with another couple of cuts later this year.
Add the dollar and slowing house prices and voila!
