We have updated our economic, currency and interest rate outlook for Australia following the recent Brexit vote and federal election as part of our July Global Macro Outlook. Outlook The world has changed, and we are shifting our forecasts to account for the shifts in expectations. We previously expected a decline in the A$, in keeping with divergence in global monetary policy expected through 2016. Convergence, as rates move lower or stay low, is the new post-Brexit trend.
At the beginning of the year markets were pricing an additional 50bp of rate hikes from the Federal Reserve. That has been whittled down to just 9bp. Rather than following the Fed, the Bank of England is expected to cut, not raise, rates. Concerns linger around the European banking sector, and a further – potentially monetarily financed – fiscal stimulus is expected in Japan.
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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.
