“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%.”
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