Rates in Australia look set to fall further with the ANZ now swinging into line with the increasing calls for the RBA to cut rates in response to slower growth and reduced inflation pressures.
The ANZ says that while “a steady expansion of the economy led by business spending, housing investment, consumer spending and employment growth across a wide range of sectors is still the most likely outcome over the medium-term… weaker growth and lower inflation in 2015 will provide the RBA with a reason and the scope to take the cash rate down 50bp to 2.00% over the first half of the year.”
They are tipping a drop of 25 basis points in March and a follow up of another 25 points in May.
As part of the recalibration of their outlook for Australian growth the ANZ has lowered its growth forecasts for 2015 now looking for a rate of 2.5% down from 3% just last November. That’s a big drop.
They do however believe that growth will accelerate back to 3.2% in 2016.
The ANZ also is forecasting the Aussie dollar to drop to 74 cents in 2015, 72 cents in 2016 and CPI to trough at 1.5%.
The ANZ is not forecasting a recession but with domestic final demand expected to growth just 0.7% in 2015 these new ANZ forecasts suggest large sectors of the economy are going to feel like they are in one.
Here is the full forecast table.