RBA to cut rate by 25 bps in August – Citibank

Analysts at Citigroup offer their outlook on the Reserve Bank of Australia’s (RBA) next policy move, with a rate cut mostly likely seen in August.

Key Points:

“NAB business confidence in April is flat and the lowest reading in over 4 years though some of the weakness may be related to pre-election uncertainty (Federal election is held this Saturday).  

Most importantly though for the RBA, employment conditions are negative for the first time since August 2015. 

The last time business confidence was at this level, the RBA cut the cash rate by 25bps.

This data on its own is unlikely to promote policy action.

RBA will want to see what happens to the unemployment rate.

There is the prospect of post-election fiscal stimulus worth around ¾pp of GDP.

Expect the RBA to cut in August, 25bps.”