Tim Toohey at Goldman Sachs is one the few economists left that will be able to look back at this period of the Australian economy with pride. Today he has delayed his rate cut prediction from July to September this year but retained it in the face of the charge of consensus. From Business Insider (there’s a first!) Goldman:
…expects a “robust” GDP figure for the first quarter of the 2014 financial year.
But this is driven by “prior strength in exports, consumption and dwelling investment together with what appears a temporary hiatus in the long fall in investment spending.”
Goldman’s in-house current activity index predicts growth momentum has slowed materially in 2Q14. Financial conditions have also tightened and there has been an “audible snapping” in consumer sentiment since the budget was released in May.
“These developments risk compounding the 1.25% hit to cash income of households from existing government policies in 3Q14.
“We have delayed our forecast rate cut of 25bps from July to September as the economic impact of the shifting policy and economic landscape is assessed,” Goldman’s note says.
“For an economy that is heavily reliant on the consumer spending to be a key driver of the broader non-mining recovery the shock to confidence is disconcerting. Indeed, consumer confidence is at a level that is now well within the rate cutting zone for the RBA in prior economic cycles.”
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.
