NAB making plenty of sense on rate cuts

From NAB via Forexlive today:

  • Say the RBA will cut in November from the current 1.5% to 1.25%
  • Previously the NAB were forecasting an RBA rate cut in June and September of 25bps each time
NAB reasoning (in brief):
  • Economic activity likely to be solid as we enter 2017
  • Real GDP in Q4 2016 likely at 0.9% q/q
  • Through the remainder of 2017, quarterly growth outcomes likely to be solid
  • Pace of growth to over 3% by Q3 2017
  • Annual average pace of growth for 2017 will be lower, at 2.3%
  • Business conditions have turned up in December and January … Suggesting the soft patch through much of H2 2016 was a ‘mid-cycle’ loss of momentum
  • Drag from mining investment reducing
  • LNG exports adding strongly to growth
  • Global backdrop somewhat more supportive
  • We do however remain concerned about the economy’s trajectory in 2018, as the contribution from residential construction, LNG exports and temporarily higher commodity prices fade and household consumption remains constrained by weak labour income growth – our year-ended growth forecasts drop to 2% by Q4 2018.

I’d shave all of those numbers but the narrative is right.


  1. “Real GDP in Q4 2016 likely at 0.9% q/q”

    After been down about 1% in previous qtr that is a bloody massive turnaround.

  2. So growth is going to accelerate to over 3% by Q3 and then RBA is going to cut? Yep, makes about as much sense as the cuts last year.

      • Glenn Stevens justification for cutting was he thought it could “grow a little faster”, not sure Phillip Lowe shares the same petrolhead mentality. RBNZ does though they’re at 3.5% and accelerating.

      • Just got word that Glenn Stevens going to advise the NSW government on housing affordability. Haven’t ROFLMAO like that for a while…

        well not since ScoMo went to London…

      • I thought you were joking too Dan. That is utterly depressing news. How dare he take that role after what he’s done to destroy affordability. If you have any doubts about his character, they’re well & truly settled now.

        “His advice will be invaluable in assessing measures that can have a real impact while avoiding any unforeseen consequences”

        Translation: His advice will state improved affordability arises from perpetual exponential price and debt growth.

  3. The global bull in bonds is over, the market should be pricing a tightening, not cut, some time from September. The call from NAB is laughable and will only eventuate if there is a global crash. As worldwide yields soar our market will get dragged along with it, hopefully finishing housing once and for all. Anyone trying to buy the dip locally in the 1994 bond bear got absolutely destroyed. Different times now no doubt but if US yields break 3% and Gundlach is remotely close saying US 10yr yields could be at 6% by 2020 then I can guarantee our rates will be north of here. Shorter term Lowe has absolutely no interest in cutting and at least for now some of the data is starting to turn positive. It won’t take much to see our back end bills and 3s drop 20 points as the market wakes up that the easing cycle, domestic and globally, is over. Sell AUD (USD will be stronger), buy stocks but run a mile from bonds (except as a spread to the US).

  4. proofreadersMEMBER

    “We do however remain concerned about the economy’s trajectory in 2018, …”

    By which time the median house price in Sydney will be $2 million and life will be beautiful?

  5. This doesn’t make sense. Growth is going to be strong in 2017 H2 and yet the RBA is going to cut in November. Even if 2018 is going to be soft – a very big if – no way they cut until the see some actual softness.

    The next rate move is up. Put your house on it.

  6. proofreadersMEMBER

    Note to diary for retail depositors for November 2017: bend over following RBA cash rate cut, to be screwed over by the banks (if not already done so in the meantime to line their pockets) based on an irrelevant benchmark rate?

  7. The bank will not pass any of the rate drop, while deposit rate is smashed further. It will only work to increase bank’s profit margin.