The Reserve Bank of Australia meet next week, Westpac with an early preview
In very brief:
- RBA certainly on hold again
Westpac say its later in the week that is more interesting, the release of the RBA updated forecasts in the Statement on Monetary Policy, August 10
- expected to confirm sustained above trend growth out to 2020
- benign inflation
- We see considerable risks around employment growth stemming from political uncertainty around next year's Federal election which would put those strong growth expectations in doubt
Westpac's major concern:
- In the previous two elections (2013 and 2016) the election result was arguably more certain than in 2019. For the 2019 election the polls; the by-election results; and the government's slim one seat majority all point to considerable political uncertainty.
- If businesses acted cautiously during the lead up and the aftermath of the last two Federal elections then we cannot rule out a repeat in 2019. Certainly the Bank's assumption of a healthy 1.6% - 1.8% jobs market over that period would be challenged.
- We do not expect the RBA to incorporate any such effect in their forecasts but recent history around election periods raises significant uncertainty about the sustainability of the Bank's employment forecasts and hence their expectation of above trend economic growth.
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The election is still a ways off:
