The Kouk's top 40 hits and misses

more Over the summer break, while fiddling through data bases, reading and just being interested in things, I unearthed a few quirky bits and pieces about the Australian economy, people, sport

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THE LATEST FROM THE KOUK

Get set for an August interest rate cut

Tue, 26 Jul 2016

This article first appeared on the Yahoo7 Finance website at this address: https://au.finance.yahoo.com/news/get-set-for-a-august-interest-rate-cut-045119121.html 

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Get set for an August interest rate cut

Get set for a further interest rate cut on 2 August, which is the date of the next meeting of the Board of the Reserve Bank of Australia. With the economy expanding at a moderate pace, at best, with the unemployment rate appearing to edge up and global economic conditions only fair, the case for a 25 basis point rate cut, to a fresh record low of 1.5 per cent, is solid. It will, nonetheless, be the inflation data next Wednesday that will help to lock in the case for lower rates.

Based on available information, inflation is set to rise by 0.8 per cent in the June quarter, which will leave annual inflation at 1.4 per cent. During the June quarter, there was a sharp lift in petrol prices driven by the jump in global oil prices. This alone will account for around 0.25 percentage points of the 0.8 per cent inflation rate.

The high inflation rate for the quarter (0.8 per cent equals annualised inflation around 3.25 per cent) would seem high enough to prevent the RBA from cutting. After all, the RBA acts with its interest rate settings to keep inflation between 2 and 3 per cent and a 0.8 per cent quarterly rise might be considered the start of a worrying uptick in price pressures.

My 2016 forecasts: A stocktake on how they are going

Sun, 24 Jul 2016

A little over six months into the year, I am doing what almost no other economist does and present a scorecard on my forecasts for 2016. The record is mixed – some big wins, some big errors.

On 1 January 2016, I had my Top 11 tips for the year for economics, politics and markets. Those forecasts are reproduced below, with my assessment of how those forecasts are travelling in bold.

1. Real GDP growth in Australia will accelerate to around 3.25 per cent, driven by strong exports, solid growth in household spending, a further lift in dwelling construction and a meaty contribution from public sector demand. Business investment will remain horribly weak, but even that might find a base during the course of the year. There seems precious little chance that GDP growth will slip below 2 per cent at any stage in 2016. [This forecast is looking quite good although there are some headwinds for GDP in the second half of the year. A reasonably good forecast.]