IMF downgrades, RBA to follow

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The IMF today downgraded global growth 20bps to 3.3%yoy (lowest since GFC), and said that the risks are skewed to the downside.

Among Australia’s key trading partners, Chinese growth was bumped up 10bps to 6.3%yoy; Japanese growth -10bps to 1%yyo; and Indian growth -20bps to 7.3%yoy.

All told, I expect that this global growth downgrade will increase the pressure on the RBA to cut rates — a pressure which I think they’ll respond to at their 7 May meeting. They responded to the IMF’s downgrade in Jan by ditching their tightening bias — so they have form in this area.

We’ll get the next clue about this in the Deputy Gov Debelle speech, The State of the Economy, at the American Chamber of Commerce in Australia (AmCham) with Adelaide Business School event, at 1.40pm on 10 April.

I still think a rate cut at their 7 May meeting is likely.

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6 comments

  1. Monsieur Debelle begs to differ.

    Me thinks the RBA is thinking/hoping the GDP data will follow the labour date

    1. Yeah, I tend to agree. Especially the bit where he said, “The tension highlighted by these different lenses on economic growth [being the GDP data and the labour market data] is of crucial importance. Hopefully we will get some resolution of this tension in the coming months with the incoming flow of data.” I think they’ll wait until August before making any move. Perhaps a really low core CPI print could change that, but otherwise I think May is out.

  2. I reckon August is more likely but a weak employment number and a soft CPI could do it for May. Employment growth has been driven by public sector hiring,

    The building activity data this week showed dwelling commencements were down 16% in Q4, The slump in new finance and approvals is morphing into a drop in building activity that is only going to accelerate.

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