ANZ Forecasts an Additional 1% Point Cut in Official Interest Rates in 2013

24 Dec 2012 - Australian Monthly Chartbook

 In a report released on 17 December, ANZ Research forecast a further 1 percentage point cut in the cash rate over the course of 2013, due to the further sharp weakening in mining business conditions in recent months, the tepid improvement in the non-mining sector, the deterioration in job advertising trends and the strong AUD.

"This will help limit the prospective rise in the unemployment rate that job advertising is signalling. If realised, such rate moves will provide significant further support to the non-mining sectors, including the housing market.

"The key issue for markets and policy makers is whether the weakest sectors of the economy will strengthen sufficiently to offset the anticipated slowing in mining investment. The RBA’s two rate cuts in recent months suggest the central bank wants some further insurance on this front.

"Overseas, lead indicators have rebounded modestly as inventories continue to be liquidated. However, we are yet to see a solid pick-up in new orders globally. As a result, we see industrial production momentum picking up only modestly through the first half of 2013, led by the US and China. In Europe, recent PMI and German IFO surveys indicate a stabilisation in growth over coming months. We forecast the central banks of the US, Japan and Europe will maintain extremely accommodative policies which will anchor bond yields. Further asset purchases or non-traditional monetary policy actions are expected to continue through 2013 – this is likely to continue to put upward pressure on the AUD."