According to Westpac economists, the Reserve Bank of Australia is expected to cut the official cash rate next month to further stimulate the country's economy.
"In recent weeks, the markets had lost confidence in the October view.On September 13, the markets were planning an October move with a probability of 26%." We felt really alone with our call of October. However, during last week, the markets moved to an 80% probability of this move, "said Westpac chief economist Bill Evans.
Evans explained that the central bank will base its decisions on three factors: the labor market, the housing market, and GDP growth.
He stated that the strong growth in employment was recognized, but that unemployment remained stable and wages remained low. Australia's unemployment rate reached 5.3% in August, which is above market expectations of 5.2% and the 4.5% target of the RBA.
Read also: What will probably force the RBA to further reduce tariffs?
"We are aware that the governor considers that the increase in wage growth is the key to a sustainable increase in spending and inflation growth", he said. he declares.
With regard to housing, Evans said that he remained a weakness despite a reversal of established housing markets.
"But, from the point of view of economic activity, investment in housing was even lower in the short term and the low turnover rate of the housing market meant that spending on housing items Furniture and other items related to housing should not contribute to the growth of consumption in Europe in the short term, "he said.
According to Westpac's forecast for the October rate cut, the cash rate would drop to another historic low of 0.75%. Another rate cut is expected in February 2020, bringing the cash rate to 0.5%.
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