Why a ‘2’ in front of the RBA cash rate would be bad news
Far from being good news, multiple rate cuts by the year-end will be reflective of an economy in some difficulty due to the fallout from Donald Trump’s tariff war.
The consumer price index for the March quarter was a good enough result to warrant a 25 basis point policy rate cut at the May Reserve Bank board meeting, but that is about it.
The trimmed-mean result at 2.7 per cent was bang on the bank’s projection. Meanwhile, the April labour force report revealed a market in rude good health with the unemployment rate at 4.1 per cent, amid record high participation rates and robust employment growth. Wage growth remains reasonable, albeit ongoing sluggish productivity growth creates questions about the sustainability of current levels.
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Stephen Miller is an investment strategy advisor to GSFM and formerly a Treasury officer who served on the personal staff of the then-treasurer Paul Keating from 1985 to 1987.
