Does anyone recall what MB described as the RBA’s “future boom” in 2010? It was so fervently embraced that it has every economist in the country terrifying households with dire predictions of endless rate hikes.
Well, it’s back. As I described on Friday, the RBA is now forecasting a consumer boom to lift growth in the forward estimates which has about as much basis in fact as did the 2010 boom that never came. Mac Bank puts it diplomatically:
Often, it’s what you don’t say that counts more than what you do. The tone from the August SoMP appears particularly buoyant, for a central bank that has once again downgraded its growth outlook. This time with reason. We think a key risk to the economic outlook from weaker population growth has been downplayed, and remain of the view that it is likely to result in rate cuts.
The RBA’s updated forecasts continue to incorporate an acceleration in growth to an above-trend pace, particularly through 2H17. But the timing has been delayed, once again. Despite a significant downgrade to oil prices (the Brent assumption is 24% lower in US$ terms, and 18% lower in A$ terms) the inflation outlook has been upgraded. The effects of lower population growth and a weaker A$ have clearly dominated.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
Often, it’s what you don’t say that counts more than what you do. The tone from the August SoMP appears particularly buoyant, for a central bank that has once again downgraded its growth outlook. This time with reason. We think a key risk to the economic outlook from weaker population growth has been downplayed, and remain of the view that it is likely to result in rate cuts.
