Capital Economics: RBA falling behind housing "threat"

Via Capital Economics:

The RBA will probably reduce its GDP growth forecasts

but should still signal that the next move in rates will be up

Our more pessimistic outlook for economic activity, the labour market and inflation suggest that the Bank may instead have to cut interest rates before long.

We believe that the Bank continues to underestimate the threat from the weaker housing market

Housing downturn and tighter credit conditions will weigh on GDP growth

Unemployment rate should rise again and wage growth will weaken

We now expect the Bank to lower interest rates to 1.25% by the end of the year and follow up with an additional 25bp cut in the first half of next year

When it cuts it will go two in quick succession. Then more next year when not enough happens.

Unless it leaves to too late and it will be panic slash and burn.

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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.

Capital Economics: RBA falling behind housing “threat”