According to ANZ analysts, Australia’s economic growth is set to pick up in H2 2019, with the low point likely to have been the Q2 2019.
“Stimulus from interest rate cuts (both actual and forecast) and tax cuts will be key. Without it growth would have been materially lower.”
“We see the prospect of a bond market rally into the end of the year due to domestic and global policy support. We aren’t expecting new lows in yields, however. For 2020, our expectation is that US yields move higher and the yield curve steepens, as the US comes through its mid-cycle slowdown. For Australia, there will be some renewed outperformance by the 10Y bond, given our expectation for the RBA. But we doubt this will be enough to drive the 10Y ACGB/UST spread through its recent historical low. That is, unless the RBA decides to implement quantitative easing (QE). That is not our central scenario, but if QE was implemented, the 10Y ACGB/UST spread would likely move below -100bp (from around -60bps currently).”
“Of more immediate importance is the upcoming employment report, which will be crucial for the RBA’s October monetary policy decision. If it as soft as we expect, an October rate cut seems more likely than not.”
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