Westpac On The Timing Of RBA Cuts Post The Budget

Westpac notes the timing of RBA rate cuts may be delayed given the stimulatory budget:

"Our analysis points to the Budget being more expansionary than we saw in any of budgets the ten years before the pandemic. The Budget is still unlikely to be a core factor for the rate decision in August, but may delay the timing of the first rate cut in 2024."

"We assess that spending in the Australian economy is going to be weaker than the Government assesses in its forecasts. Evidence of that weakness, in both the March and June quarters and complemented by the prospect of automatic increases in average mortgage rate through the second half of 2023 is likely to keep the RBA on hold in August. The spending boost from the Budget will work through the economy in 2023/24 and the RBA is likely to wait to assess the impact of that process as we move through 2023/24."

"If the expansionary budget is to have any major implications for monetary policy it will be in the timing of the beginning of that easing cycle. At worst those cuts might be delayed but given our views on the slowdown in spending; the ongoing increases in average mortgage rates; falling inflation; and the significant downturn in the advanced economies the stimulus in the budget is likely to be a second order factor for the interest rate outlook."