Australia’s NAB revised their RBA interest expectations today, now factoring in an additional rate cut in February, in addition to one in November, to take cash rate to 0.50%. NAB also said RBA “could cut as soon as October if there was further weakness in the labour market revealed next week.”

NAB noted that “the forecast of lower interest rates reflects increased downside risks to the domestic economy and greater uncertainty about the world economy.” Domestically, growth continued to undershoot RBA’s forecast and unemployment is likely to edge higher. Private demand has fallen for the first time since the global financial crisis. business survey also points to continued weakness in private demand. Internationally, global trade and manufacturing fell on US-China trade war escalation. Business confidence has slumped with firms deferring investment.

NAB also urged for additional fiscal stimulus through new infrastructure investment, cash hand-outs and/or the pull-forward of tax cuts. It also warned that more stimulus could be needed by mid-2020 even with interest rate at 0.50%, “unless the Government steps in”.

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