As Australia's economy slows, predictions of a rate cut rise
By Swati Pandey
SYDNEY, March 15 (Reuters) - Predictions that Australia's
central bank will lower interest rates this year have increased
significantly in recent weeks, a Reuters poll showed, as a steep
downturn in the housing market is seen likely to further hit
The Reserve Bank of Australia (RBA) has shifted away from
its long-held tightening bias and put rate cuts back on the
However, it is still confident about the A$1.9 trillion
economy, which has avoided a recession since the early 1990s.
Awaiting a pick-up in inflation and further falls in the
jobless rate, the RBA has left policy at a record low 1.50
percent since its last easing in August 2016. And this record
period of holding is likely to stretch into early 2021,
according to the median view of 45 economists polled by Reuters.
Still, 20 economists - 44 percent of the total polled -
forecast at least one cut to the cash rate in 2019, double the
percentage predicting that in the February poll.
Two of Australia's major banks - Westpac and NAB
- - as well as Macquarie, Perpetual
and AMP are tipping cuts this year, as are UBS,
JPMorgan and Nomura.
Of the 30 economists who gave a forecast for March 2021,
nine saw at least one rate rise while 14 predicted at least one
cut by then. The other seven expected no rate change.
The change in 2019 outlook follows disappointing
fourth-quarter gross domestic product data this month while
retail sales - a gauge of consumer health - have remained tepid.
Data this week showed Australian consumers have turned
gloomy while a closely-watched measure of business conditions
slipped below the long-run average in February.
The dismal reading on the economy, coupled with the U.S.
Federal Reserve's "patient" policy approach have led markets to
fully price in at least one RBA rate cut by August..
Macquarie economist Justin Fobo said a rate cut is needed to
stimulate the economy as there were no downside risks to easing
policy with the housing market already on a slippery slope and
banks tightening lending standards.
"Take the path of least regret," Fobo said in a March rate
"If additional policy support is necessary then it should be
provided – best to provide it early than have to take more
drastic action if growth actually turns down sharply."
The RBA has repeatedly underlined the limits of further
easing when the policy setting is already "stimulatory" while
recently noting the success fiscal stimulus has had during the
2008 global financial crisis.
Australia's centre-right government will deliver the federal
budget on April 2. It is expected to announce personal income
tax cuts and infrastructure spending ahead of general elections
due in May.
(Reporting by Swati Pandey; Editing by Richard Borsuk)
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