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Australia & New Zealand Weekly: Political Uncertainty Casts Doubt on the RBA’s Optimistic Employment Forecasts

Week beginning 6 August 2018

  • Political uncertainty casts doubt on the RBA’s optimistic employment forecasts.
  • Australia: RBA policy decision, Governor Lowe speech, Statement on Monetary Policy, housing finance.
  • NZ: RBNZ policy decision, inflation expectations, retail card spending.
  • China: CPI, new loans, trade balance.
  • US: CPI.
  • Central banks: BOJ Summary of Opinions, BSP and BOT policy decisions.
  • Key economic & financial forecasts.

Information contained in this report current as at 3 August 2018.

Political uncertainty casts doubt on the RBA’s optimistic employment forecasts

The Reserve Bank Board meets next week on August 7.

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It is certain to keep the overnight cash rate unchanged at 1.5%.

While the decision will be accompanied by the usual statement from the Governor the more interesting development for the RBA will be the release of the detailed (around 70 pages) Statement on Monetary Policy on August 10.

The Statement is always interesting because it includes the Bank’s updated forecasts for GDP; headline and underlying inflation; and the unemployment rate.

In addition there will be an extension of the forecast period to cover the year to December 2020 from the May Statement which only covered forecasts to the end June 2020.

On GDP we expect the Bank will retain its upbeat forecast for growth to December 2018 of 3.25% (recall that the March quarter saw growth of 1.0%) – a view that is particularl