GDP 3.5%, cash rate 1.5%, RBA mistake?

From Macquarie:

 Was August a mistake? The RBA has delivered 50bp of rate cuts since May. However, recent trends in the economy point to GDP growth accelerating to its fastest pace in four years (see: Aussie Macro Moment – BoP review – GDP to crack 3.5%).

 Additionally, the long-awaited rotation to public sector infrastructure investment looks to be coming through. There was a surprise upgrade to firms’ FY17 capex plans in the capex data, and non-mining investment picked up in the quarter (Aussie Macro Moment – Capex 2Q216: Surprise, surprise). The pickup in commodity prices looks set to boost the terms of trade in 2Q16. And, if sustained, we estimate that FY18 mining capex could lift by as much as 30-40% from the FY17 nadir. Also, the unemployment rate has fallen to 5.7%.

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About the author

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.