ANZ Bank argue interest rate implications of today's GDP data are not significant

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Published on Wednesday, 07 March 2012 17:47

Written by Will Peters

Earlier today we published the views of Barclays Capital, who argued that today's Australian GDP data would potentially prompt the Reserve Bank of Australia to cut interest rates in coming months.

It was shown that GDP grew by 0.4% - below analyst expectations - and importantly below the RBA's own expectation. .

ANZ Bank, however, argue that this is not necessarily the case.

A note from the bank reads:

"For monetary policy, today’s aggregate GDP result would have been somewhat weaker than the RBA’s expectations.

"However, the RBA will likely look through today’s data to some extent, given the temporary impact of the volatile investment data in today’s result, plus the fact that interest rate cuts in November and December would not have had their full impact on the economy in Q4.

"Today’s data also won’t change the RBA’s view that the significant restructuring underway in the Australian economy, driven by the commodities boom, will persist for some time to come.

"That said, given the weak headline result, the probability of a further 25bp cut in the cash rate in H1 2012 appears to have risen.

"Today’s prices and wages measures would have likely confirmed the RBA’s view that price and wage pressures (outside of the resources sector) are moderating, giving it scope to support growth.

"Given the lagged nature of GDP data, the labour market outlook will remain key to monetary policy deliberations over coming months."