Australia: GDP justifies three RBA cuts in 2019 - Westpac

According to analysts at Westpac, uncertainty has remained rife this week as Australian growth disappointed after the RBA cut rates and US trade tensions persisted.

Key Quotes

“Q1 2019 proved to be a particularly weak quarter for our economy, GDP growth rising just 0.4% and domestic demand weaker still at 0.1%. Over the 12 months to March, GDP growth was a full percentage point below trend at 1.8%, meaning per capita growth over the period was just 0.1%.”

“April retail sales data points to continued weakness in consumer spending in Q2 2019 and hence a good chance of another below-trend read on GDP.”

“The above GDP outcome will come as a surprise to the RBA and mean they will likely have to revise their growth expectations down again from an already below-trend 2.6%yr at May 2019 (to 1 decimal place). Importantly that forecast was predicated on two rate cuts by year end.”

“So with growth having disappointed again and Governor Lowe voicing a need to get the unemployment rate down to at least 4.5% (from 5.2% in April) to bring inflation back to target, we have strong confidence in our expectation that two more cuts will be delivered by year end – in August and November, taking the cash rate down to 0.75%.”