UBS have cut their economic growth projection for ozz Australia again
Q1 -0.1% q/q & 1.5% y/y (from 0.2 & 1.8%), which woud be " weakest since the GFC.".
- with downside risk to -0.5%
cut 2020 to 1.7% y/y (from 1.9%
- 2021 unrevised at 2.5%
Cite impact of COVID-19 is worse than SARS
Overall, we think it's likely the RBA will downgrade its growth profile again at the next SOMP in May
- We retain our view the starting point for the economy keeps getting materially worse
- coupled with our expectation of no material fiscal stimulus, forms the foundation of our dovish view for the cash rate, expecting the RBA to cut 25bps in April, and again in Aug-20 (albeit the latter also remains conditional on further global central bank easing). However, Governor Lowe's recent comments made clear, that a 'necessary' trigger to ease further is 'materially' higher unemployment. Hence, to see an April rate cut, despite another looming growth downgrade, it's likely that unemployment will need to rise to at least 5.3% in the next two prints (on top of weak retail sales).
