Shadow RBA: There’s no need for a rate cut before the budget

Getty/Mario Tama

Even though market pricing and most economists seem to think the RBA should cut rates again tomorrow, the ANU RBA Shadow Board believes Glenn Stevens and his colleagues should hold rates at 2.25% ahead of the May 12 Budget because there is “a lack of clear direction for the Australian economy”.

RBA Shadow Board chair Dr Timo Henckel said: “Economic data is once again painting a motley picture of the Australian economy.

“Slight improvements in the labour market, stronger commodity prices, and a headline inflation rate near the centre of the official target band stand opposed to weakening consumer sentiment and a deterioration of the international economy.

“Appreciable risks exist on both the upside and the downside.”

That implies the RBA won’t be making a mistake if it eases. Doing least harm is its mantra, after all.

But Dr Henckel said that not only does the Shadow Board believe rates should be placed on hold but it “still considers it necessary that the cash rate is lifted in 6-12 months”.

We’ll know at 2.30pm tomorrow.