CBA: Growth To Slow Significantly, RBA Will Determine Depth Of Slowing

CBA forecast “GDP growth to slow to 2.3%/yr at Q422 and moderate further to 1.5%/yr at Q423. A material slowdown in household consumption sits at the heart of our forecasts for the economy to grow well below trend from here.”

• “A quarterly contraction in economic activity in 2023 is a distinct possibility though recession is not our base case; it can be avoided provided the RBA does not take monetary policy too restrictive.”
• We expect the annual rate of inflation to peak at ~7.25% in Q422 and to decline to the top of the RBA’s target band by late 2023 (our forecast is for inflation to be 2.9%/yr in Q423).”
• “Our economic forecasts are conditional on the cash rate increasing by a further 50bp over the next two months to peak at 2.85%. The risk sits with a higher terminal rate of 3.10%. We have 50bp of rate cuts in our profile for H2 23.”
• “Monetary and fiscal policy are the key uncertainties - the path of the cash rate from here will play a huge role in determining economic outcomes in 2023, while fiscal policy also has the capacity to shape the trajectory of the economy.”