For the full picture, download the report: Australian Markets Weekly 29 April 2019

• Australia:  There’s little in the way of Australian data this week in the lead-up to the 7 May RBA meeting and 10 May RBA Statement on Monetary Policy forecast update. Both private-sector credit (NAB, mkt: 0.3% m/m) and building approvals (NAB: -23% m/m, mkt: -12% m/m) are due and we expect they will continue to show a housing-related downtrend.
• International:  The highlights in the week ahead will be official Chinese PMIs on Tuesday, the US manufacturing ISM and FOMC meeting on Wednesday, and Friday’s April payrolls report. The US earnings season is currently under way, with Alphabet of note on Tuesday.

Analysis – RBA: inflation-targeting with low unemployment

• The RBA’s central case of further progress in lowering both unemployment and inflation has been challenged by weak GDP growth and now weak underlying inflation, even as unemployment has held around 5%.
• We have pencilled in the RBA cutting rates in July and November, while the RBA recently said lower rates would be appropriate if inflation did not move higher and unemployment trended up. The low inflation results makes next week a close call, but we narrowly favour the RBA holding fire given the relative stability in unemployment.
• If, though, the RBA decided to cut next week, then history would point to a relatively quick follow-up move, most likely in July or August. The timing and likelihood the second move would be shaped by: (1) the behaviour of the unemployment rate; (2)   indicators of domestic demand and forward-looking indicators (including those in the NAB Survey); and (3) to a lesser extent the housing outlook

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