Financial Markets


The Mid-Year Economic and Fiscal Outlook (MYEFO) released today reveals downgrades to the economic outlook.

Markets have been calm overnight, in wait and see mode ahead of a series of more important events this week.

The Reserve Bank’s persistent overestimation of growth likely reflects not allowing for the decline in potential growth.

President Trump has upset markets further today suggesting that the trade deal with China might be left till after the US election, a year away.

The Reserve Bank anticipates a strong rebound in GDP growth, with annual growth accelerating from 1.4% currently to 3.1% by end-2021.

President Trump has signed the Hong Kong human rights act.

The effective lower bound for the policy rate is negative, but the Reserve Bank only seems comfortable with a 0.25-0.5% floor for the cash rate.

Household debt is growing very slowly at present, up only 4% over the past year.

Total income is growing strongly, led by a boom in mining profits as non-mining profits languish, while growth in disposable income is more measured.

Business investment is exceptionally weak at present, only slightly above the multi-decade low reached as a share of GDP in the early 1990s recession.

The Weekly explores the impact of interest rate cuts on consumer sentiment.

With the cash rate at a record low of 0.75%, short-term interest rates broadly match the all-time low reached in the 1950s. 

Across advanced economies, business investment has underwhelmed since the global financial crisis, contributing to weak productivity and lower potential growth. 

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