NAB: RBA to cut in June and keep cutting

Via NAB’s Alan Oster:

[The] “risk that the RBA delivers additional policy stimulus by early 2020, either by cutting again or opting for an alternative policy measure.”

“Yesterday’s labour force data provided further evidence that the economy is weaker than the RBA had expected.”

“Although employment has remained strong, other measures point to increased spare capacity over recent months, while forward indicators of the demand for labour have turned down, except for the less timely ABS job vacancies series.

“Given low inflation, continued weakness in the NAB business survey – where NAB’s internal indicators point to the weakness in spending becoming entrenched – and now higher unemployment, we think the Board will now act in June and that this is likely to be signalled in the May Board minutes and Governor Lowe’s speech on Tuesday.”

June then July for me. Followed by two more in 2020 and APRA easing as the housing anvil keeps falling.

ZIRP time.

Comments

  1. proofreadersMEMBER

    And at what interest rate for depositors do the banks’ hot money funding books start to walk?

    • Depositors will take whatever is given to them. They are too lazy to go find a return for their capital, and willingly choose to be rent-seekers by earning interest. So they should be thankful to receive anything above inflation. Security (i.e. no risk) should be the only return they demand.

    • Jumping jack flash

      Most importantly, what interest rates will the banks offer to their oceans of debt slaves?

      At the end of the day, the money being sucked out of the economy due to the trillions of dollars of nonproductive debt is based on the interest rates assigned to ordinary people by the banks, not by the banks to other banks.

      It is this money that is being sucked out of the economy that could be used to increase wages, fulltime positions, and productive capacity. Instead it is given to the banks for the debt that was used to buy houses, which pretty much do nothing.

    • BubbleyMEMBER

      Banking sector has known this for a while. I was told by a front line staff member that The RBA will cut by .5% and .25% this year.

      The brochures are printed.

  2. Quarterly falls on the core logic indices for Sydney and Melbourne have slowed right down no?

    Is this seasonal, am I looking at the data wrong, or are we bottoming out and its almost BOOM time again! RBA to HODL!

      • I think the price drop over the last few months doesn’t matter anyway… It’s the low volumes which signal sharply lower prices and economic activity as the debt money creation has grpumd to a halt.
        It feeds into much higher unemployment 6 months later.

  3. I think we will be zero or negative by end of 20
    Think AUD 10 year will be negative by end of 20
    This is going to get very ugly in Mel and Syd, think Mel especially we’ve been on a boom for years
    AUD with a 67 handle by end of next week
    Let’s see

  4. Has ZIRP or QE helped anywhere else? Helped the societies, not just banksters?

    Seems we are lemmings on a 10-year lag.

    • Jumping jack flash

      No.
      ZIRP and QE is to protect banks.
      Not people.
      Like LMI.

      “Seems we are lemmings on a 10-year lag.”
      You’re right.
      Our fearless leaders followed the same instructions to build an infinite debt machine, as they tried to build in the US, Ireland, Greece, pretty much everywhere.
      Ours failed (or is failing) in pretty much the same way as theirs did.
      So of course we consult the manual to find out what to do in case of failure.

      The standard action is for ZIRP and QE. It doesn’t fix the problem, but it stops the banks from failing. The banks wrote the manual, you see.

      The problem is the multi-trillion dollar pile of nonproductive debt that needs to be repaid plus interest.
      All things being equal, and using a most simplistic view, the principal of the debt should have remained in the economy so by rights it should be available for repayment of that nonproductive debt.

      The interest, however, is a completely different story. Because the debt is nonproductive it doesn’t generate additional capacity to repay the interest, therefore that extra money must be taken from the productive side of the economy.

      The solution to the problem is very simple – we need to increase productive capacity and export things to the rest of the world to earn money to repay the interest.
      But nobody got any money left to do that, the next 30 years’ worth of money has all been spent on useless houses.
      What a quandary.

      • Thanks for spelling that out, JJJ.

        Reading about how it (GFC + measures imposed after) impacted actual humans in the USA (vice Wall Street vampires), doesn’t really recommend that course of action for other nations. Or at least other nations not run by sociopaths.

        I understand the game is rigged. Doesn’t mean it’s right. Or, maybe, that there is a better option than can-kicking.

        We’ve acted to bring this about, though – and all the smart cookies in the RBA can’t even point to why demand has stagnated. As if flooding the country with a million low wage 3rd world workers wasn’t going to suppress wages and growth in same. Or that mega-mortgages wouldn’t suck up all spending capacity.

  5. Ok – clearly I am missing something here. Oz is a capital importer. In the face of AUD falls, how is the RBA going to cut rates? At the end of the day, we have to fund offshore borrowings, and the AUD falling does not help – unless i’m reading below totally wrong.

    https://www.rba.gov.au/publications/bulletin/2019/mar/developments-in-banks-funding-costs-and-lending-rates.html

    Additionally, as the housing bust proceeds apace, public ire is going to be aimed at the RBA/banks. Eventually, the powers that be are going to do something other than lower rates (because it has not worked, will be how the current rate policy is seen).

    Rates are going to have to rise. Then again, we live in clown world now, and I’m just another anon muppet, so who knows.