First rate hike from the RBA to come in late in 2020
faster employment growth will support consumption .. (but) … the consequence of the surge in household debt to record highs will be a period of slower consumption growth
over the past year we have become more worried about the outlook for the housing market, more concerned about the near-term consequences for the economy if the Labor Party were to win the election due by May 2019 and less bullish on the outlook for the global economy
we expect GDP growth in Australia to slow
we have been struck by how little wage growth and underlying consumer price inflation have risen
surprised at how dovish the RBA has stayed
in other words, we’ve become more convinced that the link between economic growth and inflation is much weaker than it used to be and more convinced that the RBA is not going to rush to raise interest rates
iron ore price will fall
investors will seek safe havens as US GDP growth slows next year
we are expecting the US Fed to cut interest rates in 2020
would … mean that the RBA misses the global tightening cycle
That’s not as unusual as it sounds either as Australia’s business cycle has not been in sync with America’s for the best part of 20 years.
(so) the downward pressure on the Australian dollar may be a bit stronger than we previously thought
Seems reasonable to me. Though I would add that I expect both the US and Chinese economies to be stronger than CE does and the Australian economy to be weaker, bringing us to roughly the same point.
I mean, seriously, name one central bank that ever hiked rates during a property bust, let alone one nursing a bubble the size of Australia’s.
David Llewellyn-Smith is chief strategist at the MB Fund which is long US equities that will benefit from a falling Australian dollar so he is definitely talking his book (or CE is!) Below is the performance of the MB Fund since inception:
If the ideas above interest you then contact us below.
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.
