RBA less likely to cut interest rates

This article was last updated on April 16, 2022

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JP Morgan chief economists Stephan Walters said “Things are still looking pretty awful in Europe, and China’s growth is slowing and admittedly these (GDP) figures are a few months old”. GDP grew by 4.3 percent, which was assisted by passing through the data of the depressing impact of natural disasters in 2011.

It was the strongest growth rate since the twelve months to September 2007, in the year through March. The figures anticipated that Reserve Bank of Australia (RBA) would hardly cut its interest rates yet again in the coming few months.

On Wednesday, the Australian Bureau of Statistics reported that the economy rose by a seasonally adjusted 1.3 percent, helped by strong household spending and business investments in the January-March quarter from the previous quarter, which was more than double of what the economists had expected. It was more than twice the growth rate which was upgraded to 0.6 percent of the final quarter of last year.

On the other hand, Stephan Walters said that after looking at the uncertain global economic outlook, it was very likely that before the end of the year RBA might cut another 50 basis points.

However, according to the treasurer Wayne Swan and CMC chief market strategist Michael McCarthy, the GDP data had surprised the economists and traders that caused the local share market to spike sending the Australian dollar higher and some sectors outside the mining business are struggling against a high Australian dollar.   

Shane Oliver who is an AMP chief economist have said that this strong GDP growth rate was not likely to persist because the recent data showed weakness in the consumer spending in the subsequent quarters while service, retail, manufacturing and housing sectors were also likely to fall.