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RBA: VIEW: Friday saw Westpac note that "the RBA's CPI & unemployment forecasts
do not envisage either reaching tgt by June '22. These forecasts are broadly in
line with our own view. We can't rule out the possibility of even greater
divergence from the objectives over the next few years. Until we get more
clarity around the way in which the econ develops, current (RBA) policy is apt.
However, a serious case can be made for the RBA to consider further cuts &
entering -ve territory for the cash rate if it becomes apparent that the econ is
deteriorating even more than is currently exp." They note that +ves from such a
move would include: A boost to AUD competitiveness with other major central
banks anchored at their ELB & the impact of lower rates on retail lending.
- They note that risks to the fin'l system would be ltd by the RBA restricting
its QE policy to the short end of the yield curve & there may be some risks
around the currency response. However, they believe that the biggest concern
would be the impact -ve rates would have on exp. & confidence. Other concerns
about inflating asset prices; prolonging the existence of zombie companies; and
preserving bank margins/profitability are functions of historically low rates.