Goldman Sachs: RBA On Deck, Between Better Data And Fresh Lockdowns

Goldman Sachs note that "the RBA will likely have to strike a balance between strong macroeconomic data, including for the labor market, and a resurgence in COVID cases that has led to fresh lockdowns in various cities. Our economists continue to expect that the RBA will reiterate their April 2024 YCC target, noting that hikes before 2024 are unlikely given low wage growth and inflation. Additionally, Governor Lowe has emphasised that wage growth, currently at 1.5% Y/Y, would need to be above 3% for inflation to be sustainably within the RBA's target range. However, our economists also expect the RBA to announce a more flexible extension to QE of AUD$5bn/week after the current program ends in September. They also estimate a material (40%) chance of a hike in the cash rate in 2023, should unemployment fall more quickly than expected; yet, given lack of hard data between now and the November Statement, it's unlikely that this kind of policy shift would occur over the near-term. We continue to think AUD has more limited upside relative to some of its G10 peers and forecast mild underperformance versus NZD, CAD, and EUR."