GDP should average 2.4% in 2015 and 3.0% in 2015 vs previous forecasts of 3% and 3.25%, Citi economists Paul Brennan and Josh Williamson say.

They expect the RBA to cut rates twice more in this cycle, to 1.75% vs 2.25% currently.

The downgrades follow a slight lowering of global economic growth forecasts, with the weighted average of economic growth in Australia’s major trading partners expected to fall to 4.1% in 2015 vs 4.3% in 4.3% in 2014, before recovering to 4.3% in 2016.

“The slowdown in China has been more marked than we and others had expected and this is impacting commodity prices,” Citi economists say.

“We have lowered our terms of trade forecast slightly again and similarly our nominal GDP forecast for both years….so more support from the RBA is needed.”

Honestly, 3% next year, that’s a downgrade? And from Morgan Stanley on iron ore via Forexlive:

  • Citing weak China and saying there is a surplus of stock that will probably double
  • Price will average $57 / tonne in 2015 (down 28% on prior forecasts)
  • For 2016, $65 (cut of 13% on prior forecast)
  • 2017, $71 / tonne (cut of 5%)
  • Say seaborne supply will exceed demand by 129.3 million tons in 2017 from an estimated 55 million tons this year
  • “The trade’s being unsettled by an extraordinarily weak start to the seasonal expansion in activity for China’s steel sector. Numerous new mining operations that appeared this past decade are now uncommercial at current prices; many of these have already closed.”

All of them far too high.