By cutting rates, the RBA is sending a signal to the market, to politicians and to the community at large, that the Australian economy is not firing on all cylinders
The sluggish GDP figures, particularly the weakness in household consumption, shows the RBA would have been justified in cutting cash rates faster.
It seems inevitable the Reserve Bank of Australia will drop the cash rate in its meeting next week, and possibly again later in the year.
So, the Reserve Bank of Australia resisted growing calls to cut interest rates yesterday. They were right to do so.
The economic forecasts for real GDP and real wages contained with the Budget – especially in the out years – seem reliant on Australia lifting its relatively lax productivity performance.
Our view is not as gloomy as some. While overall KPMG sees the short-term economic outlook remaining mixed, we remain optimistic that growth should start to lift through 2019.
The Australian economy has slowed dramatically during the final quarter of 2018, with GDP growth of only 0.2 percent q/q, and 2.3 percent y/y