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ISCOVER
Staff Reporter
Despite new figures expected to show that underlying inflation remained subdued in the March 2013 quarter, National Australia Bank believes there is still scope for the Reserve Bank of Australia (RBA) to cut rates.
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In its CPI Preview, released yesterday, NAB’s chief economist Alan Oster said underlying inflation should remain within the RBA’s target over the medium to longer term.
That said, in the minutes of its April meeting, the RBA judged that the “inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand.”
Mr Oster said this raises a question: what is the tipping point for further policy easing?
“No doubt the RBA will remain focused on the performance of the non-mining sector, and in particular, the impact that previous stimuli are providing to this sector,” he said, “but we remain unconvinced at this point that the non-resource sector will be able to fill the hole caused by the imminent passing of the resource investment peak next financial year.
“Combined with the expected rise in the unemployment rate to near 5.75 per cent by mid-year, these inferences imply the need for a further two 25 basis points cuts, which we have tentatively pencilled in for June and November.”
