### POV: RBA SET FOR FIRST RATE MOVE SUNCE......>

RBA: ### POV: RBA SET FOR FIRST RATE MOVE SUNCE 2016

The last month has seen a surprise election result, macroprudential easing in

the pipeline, a further uptick in the unemployment rate (along with an uptick in

participation, underemployment & underutilisation) & a speech from RBA Gov.

Lowe, which has left the RBA staring down the barrel of its first rate cut since

Aug '16. Mkt pricing is virtually certain that such a move will take place, so

focus will likely move to the forward guidance (IBs currently price ~60bp worth

of easing by end '19, including a cut tomorrow). Participants should be willing

to wait until Lowe's evening address for clues on future moves.

- Base Case: A 25bp cut with a hat tip to at least 1 further cut (possibly in

Lowe's evening speech). The Bank's view in its May SoMP was based upon 50bp

worth of easing, with many believing that the Bank is overoptimistic.

- Dovish Case: Suggestions that easing above & beyond the prev. assumed 50bp of

cuts needs to be implemented to support the labour market &/or GDP growth.

- Hawkish Case: A wait & see approach on the back of the assumed cut to see how

the outlined macropru measures feed through into housing & consumer spending.