VIEW: NAB "now expect the RBA to cut the cash...>

RBA: VIEW: NAB "now expect the RBA to cut the cash rate tomorrow by 25bp & again

in April, taking the cash rate to the RBA's self-imposed floor of 0.25%. We also

see a risk of a 50bp cut tomorrow in an aggressive response to the unfolding

growth shock resulting from the spread of coronavirus. The RBA should also

signal its willingness to consider other measures should stress emerge in the

financial system & markets (e.g. measures to support liquidity & ongoing access

to credit mkts). While we have long factored in further rate cuts given an

underperforming econ, the coronavirus is having a large -ve effect on China,

Australia's largest trading partner, and also in the local econ, with the travel

ban curbing tourism & education exports & spill-overs to local spending &

disruptions to supply chains. The virus outbreak represents both a supply shock

& a demand shock, likely significantly weighing on business & consumer

sentiment. Lower interest rates can help cash flows, lower the AUD & potentially

boost confidence, but easier fiscal policy will also be required, particularly

when both the household sector & biz investment are already weak. Measures to

assist firms manage across cash flow impacts would likely be helpful."