Australia NAB Revises RBA Rate View, Sees 1st Rise in Aug 2018

By Sophia Rodrigues

     SYDNEY (MNI) - National Australia Bank has revised its view on the Reserve

Bank of Australia's cash rate and now expects the first rise in August --

earlier than a December rise forecast by Commonwealth Bank of Australia.

     NAB is now the most hawkish of the big four Australian banks -- forecasting

two rises of 25 basis points each in August and November 2018 and two more in

2019 taking the cash rate to 2.5%.

     ANZ and Westpac expect the RBA to leave the cash rate at 1.5% in 2017 and

2018.

     Even after four rises the cash rate will remain below the RBA's estimate of

a neutral nominal rate -- suggesting monetary policy will remain supportive of

the economy, chief economist Alan Oster said.

     The change in view follows upward revisions in forecasts for employment,

GDP and investment, NAB said.

     GDP growth will continue to build in late 2017 as LNG exports continue to

rise and government spending remains strong, NAB said.

     "We still expect growth momentum to ease somewhat through 2018 and 2019 to

around 2.5% -- which is in line with NAB's estimates of potential growth --

although domestic demand is a bit higher in 2019," NAB said.

     The forecast changes are largely a result of a stronger labor market which

feeds into slightly higher wages growth with the unemployment rate forecast to

fall to 5.4% by the end of 2017, 5.3% by end-2018 and 5.1% by end-2019, NAB

said.

     Among others in a MNI poll Goldman Sachs, HSBC and Bank of America-Merrill

Lynch are the most hawkish with rate-rise forecasts for the first quarter of

2018.

     J.P.Morgan is still forecasting a rate cut -- expecting two reductions in

the first half of 2018. Its recent commentary suggests conviction for further

cuts remains high -- though the timing may be uncertain.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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