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4 Jun 2014
Strong Aus GDP not a surprise for the RBA - Nomura
FXStreet (Bali) - The Nomura Research Team shares their take on the latest Australian GDP print, which saw Q1 growth at 1.1% and 3.5% in an annual basis.
Key Quotes
"The stronger GDP growth print contrasts with the government‟s forecast of 2.75% growth for 2014-15, released in the Federal Budget (see First Insights - Australian Budget – taking the tough medicine early, 13 May 2014). However, given slightly softer confidence and activity data recently, Q2 GDP is unlikely to be sustained at this level, in our opinion."
"In the markets, AUD was marginally higher on the data, though expectations of a strong number had been priced in after decent balance-of-payments data this week. In the rates market, expectations of rate cuts were pared back by 3-4bp in the early 2015 RBA OIS dates."
"In our view, the stronger GDP print should not be a surprise for the Reserve Bank of Australia (RBA) and should not change its economic outlook given its expectations of a contraction in resource-sector investment. Nonetheless, the strength of the economy in Q1 may reduce the need for fiscal tightening and lift business confidence should growth remain close to trend."
"We continue to expect the RBA to keep its policy rate on hold until H1 2015."
Key Quotes
"The stronger GDP growth print contrasts with the government‟s forecast of 2.75% growth for 2014-15, released in the Federal Budget (see First Insights - Australian Budget – taking the tough medicine early, 13 May 2014). However, given slightly softer confidence and activity data recently, Q2 GDP is unlikely to be sustained at this level, in our opinion."
"In the markets, AUD was marginally higher on the data, though expectations of a strong number had been priced in after decent balance-of-payments data this week. In the rates market, expectations of rate cuts were pared back by 3-4bp in the early 2015 RBA OIS dates."
"In our view, the stronger GDP print should not be a surprise for the Reserve Bank of Australia (RBA) and should not change its economic outlook given its expectations of a contraction in resource-sector investment. Nonetheless, the strength of the economy in Q1 may reduce the need for fiscal tightening and lift business confidence should growth remain close to trend."
"We continue to expect the RBA to keep its policy rate on hold until H1 2015."