From the SMH:
Capital Economics has hit the local market with a bang, with the London-based economic research consultancy predicting the RBA’s cash rate will be 1.5 per cent by the end of the year and that the local economy will grow by a paltry 1.8 per cent this year with unemployment reaching 7 per cent by December, and potentially as high as 7.5 per cent next year.
The bearish calls coincide with the appointment for the first time of a chief economist for Australia and New Zealand, Paul Dales, who believes that the RBA and economists will be forced to downgrade GDP and inflation forecasts under the increasing weight of the end of the mining investment boom.
The forecasts are well below the consensus. On economic growth, the RBA’s mid-point estimate is for 2.25 per cent GDP growth, while the market is pencilling in 2.6 per cent growth.
The 1.5 per cent rates call is lower than traders are pricing in at 1.75 per cent a year from now, while most economists are more likely to see a 2 per cent trough in rates.
It’s a similar story for unemployment, with the RBA guesstimating 6.5 per cent and the market 6.2 per cent.
Good to see some commentary outside of the banks. And they are right!
