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In this report:
Australia RBA stuck with its policy rate
IMPORTANT DISCLOSURES
AmBank Research
Wednesday, 06 September 2017
Anthony Dass
Chief Economist/Head
anthony-dass@ambankgroup.com
03-20322972
Australia
We feel the current low interest rates should continue to support the GDP. The high household debt and low wage
growth will act as hurdles to growth despite a pickup in retail sales which could enjoy a limited upside. Meanwhile,
we place a 30% chance for a rate hike in 2H2018 by 25 basis points and a 70% chance of no rate hike in 2018 as
much will depend on how the GDP, inflation and financial stability craft out.
In line with our expectation, the Reserve Bank Australia (RBA) kept its official cash rate at its historic low of 1.5% for the 13th
straight month. The last time the RBA reduced its official cash rate was in August 2016 by 25 basis points.
The reason for holding rates is driven by the strong dollar which will weigh on the economic growth and employment. Also
the strong currency is putting a lid on the current low inflation to reach the 2%-3% target range. Furthermore, house prices
are easing, especially in Sydney.
We feel the current low interest rates should continue to support the GDP. We expect the policy rate to remain at current
levels given that the high household debt and low wage growth will act as hurdles to growth despite a pickup in retail sales
which could enjoy a limited upside. Basically, the RBA is stuck with the current rates.
Meanwhile, we place a 30% chance for a rate hike in 2H2018 by 25 basis points. Much will depend on how the GDP, inflation
and financial stability craft out. The risk for rates to remain unchanged throughout 2018 is still high, at a 70% chance.
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AmBank Research
Wednesday, 06 September 2017