In the Statement of Monetary Policy, RBA noted that the economy has “slowed” and inflation “remains “low”. Also, “subdued” growth in household income and “adjustment” in housing markets affected consumer spending and residential construction. Still, labor market is “performing reasonably well”. Underlying inflation came in lower than expected in Q1 and “with pricing pressures subdued across much of the economy”.
Looking at the new economic projections, 2019 growth forecasts was revised down notably from 2.75% to 2.00%. But 2020 growth expectation was unchanged. Unemployment rate will stay longer at 5.00% through Dec 2020. Headline CPI was expected hit 2.00% in Dec 2019 and stay there throughout. Core CPI is revised slightly to 1.75% in Dec 2019 and 2.00% in Dec 2020.
All in all, while 2019 growth is expected to undershoot, it’s expected to pick up quickly. The downward revision in core CPI was just showed a slower pickup back to target, not anything disastrous. Based on this outlook, RBA still has a lot of room to wait and see the developments, before cutting interest rates.
GDP growth year average:
- 2019 at 2.00%, revised down from 2.75%;
- 2020 at 2.75%, unchanged.
Unemployment rate:
- Dec 2019 at 5%, unchanged;
- Dec 2020 at 5%, revised up from 4.75%.
CPI:
- Dec 2019 at 2.00%, revised up from 1.75%;
- Dec 2020 at 2.00%, down from 2.25%. .
Trimmed mean inflation:
- Dec 2019 at 1.75%, revised down from 2.00%;
- Dec 2020 at 2.00%, revised down from 2.25%.
