NAB making plenty of sense on rate cuts

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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
More:
  • 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.

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.