A defining week for Australia this week with all attention on the Federal budget which for once, will overshadow the monthly Reserve Bank monetary policy meeting earlier in the day.
Could the Reserve Bank announce a new series of measures to go with the budget spending?
The AMP’s chief economist, Dr. Shane Oliver believes there is a chance it will.
“We expect more easing from the RBA for the simple reason that its forecast outlook for inflation and employment is not consistent with its objectives and it has highlighted regularly over the last month or so that its considering options for further easing.
“Our base case is that the RBA will cut the cash rate, the Term Funding Facility rate and the three-year bond yield target to 0.1% on Tuesday so as to present a united “Team Australia” front with fiscal policy on the same day and thereby get a bigger impact.
“And this is what we think they should do. Why wait” he asked in his weekend note.
But he did say there’s also a chance the bank will do nothing.
“…given the lack of enthusiasm amongst journalists thought to be connected to the RBA for a Tuesday move its close to 50/50 as to whether the cut will come in the week ahead or at the RBA’s November meeting when it will also have a new set of forecasts.
“Over the next six months we also see the RBA tweaking forward guidance to not raise the cash rate until full employment is reached and inflation is sustainably within the 2-3% target band and adopting a more traditional quantitative easing program extending beyond the three-year bond,”
The RBA will refer to financial stability questions in its post-meeting statement and release the second review of stability this Friday.
On the data front in Australia, the trade balance for August is out tomorrow (it’s already been detailed in the preliminary report late last month with the surplus around $4.6 billion, imports and exports falling.
The payroll jobs data up to September 19 will be released on Wednesday and housing and business finance for August will be out on Friday.
