RBA revises down growth and inflation forecasts

Today’s release of the Quarterly Statement on Monetary Policy (SOMP) from the RBA sees the Bank revising down their forecasts for GDP growth and inflation in coming years (available for download here). This will come as no surprise given their recent cut to the Cash Rate and the fact that the “easing bias” remains clearly in place. The table below details these revised forecasts along with the previous (Feb SOMP) forecasts for comparison.

Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17
GDP 2.5
(2.5)
2
(2.25)
2.5
(2.25-3.25)
2.5-3.5
(2.75-3.75)
2.75-3.75
(3-4)
2.75-4.25
(3-4.5)
CPI 1.7
(1.7)
1.5
(1.25)
2.5
(2-3)
2-3
(2.25-3.25)
2-3
(2.25-3.25)
2-3
(2.25-3.25)
Core inflation 2.25
(2.25)
2.25
(2.25)
2.5
(2-3)
1.75-2.75
(2-3)
1.75-2.75
(2-3)
1.75-2.75
(2-3)

The RBA also includes a graph which demonstrates the confidence intervals around their central GDP growth forecasts. The RBA remain 90% confident that we will not be seeing a recession in Australia for at least a few more years. The SOMP states that “GDP growth is forecast to remain below trend for a bit longer than had been anticipated in the February Statement.” Also worth noting that the Federal Budget forecast for FY 2015-16 is GDP growth of 2.75%, which is at the upper end of the RBA’s revised 2-3% range for the Fiscal Year.

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