Via Annette Beacher from TD Securities on what she thinks needs to happen for the RBA to lower, but also to lift rates:

The case for a rate cut requires:

  • A broad range of macroprudential tools deployed in early 2015 to cool housing without the need for higher cash rates
  • The RBA lowers its end-2015 core inflation projection from 2¾ per cent to closer to 2¼ per cent;
  • A rising unemployment rate beyond 6.5 per cent by mid-2015;
  • Consumer spending sinks;
  • And globally trade flows with Australia wane (volumes, not just values)

On the other hand … for the next move to be up for the cash rate, we’ll need to see:

  • The AUD free falls towards 80 US cents, rebalancing the economy and preventing inflation from falling below 2 per cent;
  • GDP starts surprising to the upside;
  • The weaker AUD boosts tradable inflation despite the slide in energy prices;
  • Unemployment levels decline over in H2 2015 to below 6 per cent, and globally
  • The US economic recovery spreads to other developed nations, justifying the US Federal Reserve tightening from Q3 2015

Beacher suggests 80 cents is fair value for the AUD now …

beacher

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For more analyst comments on today’s Australian GDP data and impliactions for the RBA & AUD ….Australian Q3 GDP comes in at less than half expectations – analyst comments