Analysts at Australia and New Zealand Banking Group (ANZ) believe that the latest strong Australian employment data has weakened the case for a Reserve Bank of Australia (RBA) next month.
“The strength in employment over November/December and the associated decline in the unemployment rate to 5.1% at the end of the year from 5.3% in October will reinforce the RBA’s view that “the Australian economy appear[s] to have reached a gentle turning point.”
This makes it difficult to see the RBA easing in February, notwithstanding the short-term hit from the bushfires and the likely downward pressure on near-term growth expectations from the weakness in consumer spending evident in the Q3 GDP data.
Accordingly, we are no longer forecasting a February rate cut. We still think further rate cuts are more likely than not over the course of 2020, however.
Continued weakness in consumer spending and soft business investment suggest that progress toward lower unemployment will stall at a level that is inconsistent with the RBA achieving its policy objectives. We are in the process of reviewing the likely timing of these future rate cuts.”
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