• We have changed our view on the cash rate, to include an extra cut in late 2019 – while heavily data dependent we have tentatively placed the cut in November. We also think that lower interest rates will be supported by fiscal stimulus later this year. We would not rule out the possibility of alternative monetary action in early 2020, in addition to further rate cuts, if the economy remains very subdued, but have not put it into our projections.
• The forecast of a larger reduction in interest rates reflects our judgment that the economy is losing momentum and is weaker than reflected in the Reserve Bank’s recently downgraded near-term growth outlook. The loss of momentum is apparent in private demand, which has barely grown over the past year, and more timely indicators, such as the NAB business survey and internal data, which point to a weaker labour market and entrenched weakness in spending.
The full text of this article is available to MacroBusiness subscribers
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.
