VIEW: With underlying inflation falling.........>

RBA: VIEW: With underlying inflation falling sharply in Q119, the trend of

confusing signals continues for the RBA. While we think the inflation data is

unlikely to make a dent on RBA's thinking, the declines registered in

non-tradables inflation are likely to be a cause of worry. Along with a strong

labour market, weak GDP growth, high trade surpluses & low household spending,

the RBA is facing a kaleidoscope of data which appears to be moving in different

directions. As such, the RBA has no choice but to stick to its creeping dovish

bias & remain data dependent. In the minutes of the previous board meeting, the

RBA had indicated it will look to resolve the ongoing conundrum between the

weaker GDP growth & the robust labour market data, and now inflation also has

been added to the mix. We believe the only factor keeping the RBA from easing is

the ongoing strength in the labour market, which will prevent any easing in the

next meeting, but we do need to observe that data very closely in the next three

months. If the trend unemployment rate starts to rise toward 5.2-5.5%, we think

the RBA may consider cutting the policy rate 25-50bp in H219. However, our

forecast remains for the RBA to stay on hold in '19.