On Tuesday, the RBA announced its March decision to keep key interest rates at 1.5 percent, in line with the forecasts of all 31 economics respondents. This is the 28th consecutive meeting of the Federal Reserve of Australia to keep key interest rates unchanged at an all-time low of 1.5 percent. The short-term Australian dollar is not volatile, the market will also focus on the next trading day's RBA Chairman Lowe's remarks and Australia's fourth quarter GDP data, is not expected to be optimistic, the Australian dollar short-term still has some downside risks.
Low interest rates continue to support Australia's economic, the RBA said in a resolution statement. Further progress is expected to be made in reducing unemployment and returning inflation to target levels, but the progress is likely to be gradual. On the basis of the information available, the Policy Committee ruled that the meeting's insistence on monetary policy would be consistent with the need for sustainable growth of the economic and the achievement of inflation targets. Australia's GDP will grow by about 3 percent in 2019, with a benchmark forecast for potential inflation of 2 percent in 2019 and 2.5 percent in 2020. The main uncertainty surrounding the outlook for economic includes household spending, while trade tensions continue to create uncertainty for domestic economic, the RBA warned. Indicators suggest that Australia's economic has slowed from the second half of 2018 and that the housing markets in Sydney and Melbourne will continue to adjust. The fall in real estate prices could prompt households to control consumption, which is a major risk given that consumption accounts for nearly 60 percent of GDP. Sydney's house prices are reported to have fallen 13.2% from their peak in mid-2017. The RBA believes employment is expected to fall further to 4.75 percent and wage growth will continue to rise over time. Business investment and rising public infrastructure spending support economic growth prospects, while household income growth is expected to pick up to support household spending; The policy remains unchanged in line with the current situation of sustainable economic growth, with some bank lending conditions tightened. Australia's economic outlook largely depends on the labour market: if unemployment continues to fall, interest rates will remain unchanged; but if unemployment starts to rise, then easing may be considered. The RBA finally warned that the global economic outlook was still within a reasonable range, but downside risks had risen.
The current market is not optimistic about Australia's fourth-quarter GDP data, and the latest data suggests this risk. Statistics released by the Australian Bureau of Statistics on Tuesday showed that net exports in the fourth quarter dragged down 0.2% of GDP growth, double the analyst's estimate; the current account deficit in the fourth quarter dropped sharply to A$7.2 billion (US$5.1 billion) The decline is more than estimated, and export earnings are boosted by rising prices rather than export. The Australian Liberal Party-National Party Government is also facing a severe election situation in May. It is widely expected that the government will throw tax cuts and increase spending measures in the annual budget released on April 2 to attract votes; considering that analysts expect the economy to grow only 0.4% in the fourth quarter, and the risk is biased downwards. A generous initiative is just the right time. At present, the market expects Australia's fourth-quarter economic growth to fall from 2.8% in the previous quarter to about 2.6%, which makes the Reserve Bank of Australia's estimate of 3% growth this year seem more optimistic. Although it is not guaranteed, we believe that the Reserve Bank of Australia is more likely to cut interest rates this year; the core issue is the weakening of the regional and global economic growth environment, which is aggravating for Australia; it is expected to cut interest rates in July and August. Will drop to a record low of 1%.
