Invest
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively.
GDP data prompts economist to predict faster RBA rate cuts
Australia's latest GDP growth data has come in significantly below expectations, prompting an economist to suggest the Reserve Bank may need to ease monetary policy more aggressively.
The quarterly GDP growth figure of 0.2 per cent fell short of the already low expectations set by economists and was three times slower than March projections.
Krishna Bhimavarapu, APAC economist at State Street Global Advisors, said the weak data fundamentally changes the approach to the Australian economy.
"Today's GDP growth data came in below our low bar (0.3% q/q) at 0.2%; it's three times slower than what we pencilled in March," Bhimavarapu said.
"This changes the fundamental approach to the Australian economy as the RBA may ease faster and potentially by larger magnitude when they meet next."
The economist said the data resolves questions about the effectiveness of the central bank's monetary policy stance.
"Either way, the data settles the debate that the cash rate remained restrictive for longer than perhaps needed and that growth is affected as a result," Bhimavarapu said.
The weak GDP figures suggest the Reserve Bank's restrictive monetary policy may have weighed more heavily on economic activity than initially anticipated.
The data is likely to influence the RBA's future policy decisions, with the possibility of more substantial rate cuts being considered at upcoming meetings.
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