In Australia, the Reserve Bank is expected to reveal its first rate cut on Tuesday after 12 consecutive 0.25% increases since May 2002 that have taken the cash rate up to 7.25%.
While inflation remains way above target, recent economic data indicates that the economy has slowed dramatically and that unless interest rates start to fall, the risks of a recession will continue to rise.
Building approvals out Tuesday from the Australian Bureau of Statistics will confirm the slump continues in housing, but they should also indicate that the rate of decline has levelled off.
While recent statements from the RBA have clearly signalled that lower interest rates are on the way, it doesn’t appear to be alarmed enough to undertake a 0.50% cut just yet, so a 0.25% move is expected, followed by another 0.25% cut perhaps in October or November, depending on the data.
Australian data for the current account figures for the June quarter is out later today, aggregate profits, inventories tomorrow, trade and June quarter GDP will be released, along with the TD Securities/Melbourne Institute’s inflation gauge for August.
June quarter GDP is out Wednesday growth is likely to be just 0.3%, or 2.8% year on year, weighed down by poor consumer spending and housing activity only partially offset by solid business investment.
The Bank of England, Bank of Canada and the European Central Bank will also be meeting to consider interest rates but both are likely to leave them on hold for now, although both could be cutting in the next six months.
Canadian second quarter growth rose a tiny 0.1%, compared to forecasts of a 0.7% rise, but the economy is for the moment positive after the contraction in the first quarter.
German and eurozone inflation eased to 3.8%, but that’s still too high for the ECB to cut interest rates.
The profit season has finished here, so the focus will be on ailing companies in the financial and infrastructure areas, led by ABC Learning Centres that has yet to produce its 2008 accounts. Expectations are for a big loss.
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MONDAY:
Australian Bureau of Statistics releases business indicators and the June quarter balance of payments and international investment position. TD Securities/Melbourne Institute inflation gauge for August. RBA Commodity Price Index for August.
TUESDAY:
Reserve Bank board meeting, announcement at 2.30 pm, plus statement. The Australian Bureau of Statistics releases July building approvals 11.30 am. KPMG survey of general insurers.
WEDNESDAY:
National accounts for the June quarter the Bureau of Statistics at 11.30 am. Australian industry group/Commonwealth bank performance of services index.
THURSDAY:
International trade for July, industrial disputes and managed funds for the June quarter. Metcash AGM. Platina resources AGM
FRIDAY:
Meetings for Brickworks, Incitec Pivot. AIG/Housing Industry Association performance of construction index.
