China still-slowing

According to the FT, the HSBC China PMI for December was +1pt to 48.7pts. There is a meme out there about how fast growing Asia is our advantage – but it’s a myth. The PMIs are soft globally.

Australia’s advantage is that our trading partners have scope to ease monetary and fiscal policy. We also have the scope to do so – I expect a few more cuts at the start of next year.

I think that a total of -50bps at the first two meetings seems fair (-25bps per meeting).  The local and global inflation push of early 2010 has abated, and credit growth remains weak – so we can afford to move toward the lower end of the neutral range for policy.

That should be enough to stabilise house prices, but is unlikely to send them higher once again.

Advertisements
This entry was posted in Uncategorized. Bookmark the permalink.

please comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s