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Hi, Justin Smirk here. I like to cover a couple of key issues that have gone through this week
First of all about the US federal reserve and Janet Yellen first press conference
Secondly Westpac economics change of view on
the rate cut view here in Australia
First with the US Federal Reserve, the chairperson
Janet Yellen, she held her first press conference and it was an interesting one
in a sense you can see a lot of
hesitancy which were asked a direct question
if and when the feds finish completing its
removal of it's excess equity, i.e when
tapering, how long late it is expect we'll see the first rate hike
now you can see her squirming and twisting in reality she didn't want to give
an answer the question but she did
in the end she said roughly six months. Now the market got all very excited about this
and speculate the next round of rate cut could be as possible as early as
Mid next year , we saw a bit of caution tamper down on that
Cause then you go look at the statement and what they trying to say
you see a lot more cloudiness
the forecast, the dots as they often refer them too are pointing towards a more upbeat
near term view
that's consistent with the idea rate heights however you a lot of down
playing of all the information there and you'll see them down play what's going on
with the employment numbers
saying that even if employment falls an lower level
than unexpected
it's been driven by factors that don't support a strong labour market
and of course then you going to the outlook for the expectations for rate
again and the voting patterns again very very mixed
now if you like Westpac and your uncertain about the outlook of SA
typically think is going on form expectations like it has for the last
two years
then you get a profile were calling early rate hikes in the US
Is way too premature now here in Australia I'm sure you aware you've
heard that Westpac changed the view and that there be two more rate cuts this year
what we've been seeing is a much stronger domestic housing market coming
through from this lower rate since feeding throughto
helping support the creation of employment
cycle, you've seen better consumption numbers
and also have been seeing the RBA governor consistently tell us what his
focusing on now
is interest rate stability, that interest rate stability
is far more important to him now than ever before and that suggested
very high hurdle for him to get over if we want to see further rate cuts
now of course since then we've seen this
strain labor market which was very weak the second half of this year shows
the turning around, it had to
the labour market was on path to continue this place we're heading into
recession
situation we're not there far from recession and a bounce was due to come
See put it all together and you see a very high little hurdle here for further
rate cuts here in Australia so we've taken it off the board
things we've done that view, you've seen weaker data coming through
also we see the Australian dollar now back about ninety cents
it's going to be a long drawn-out process, rate hikes
are weighed down the cards and is there a risk that there could be a cut out there
yes but it's a risk, more than an actual forecast
so for now we more comfortable with the idea the first half of the year growth
in Australia is going to be quite strong well quite firm
you are going to see the rate cuts
push way back out and more like debate about rate hikes talked about
but given the strong Australian dollar the momentum we're losing from our investment
mining cycle
and of course the restructuring of our ecomony is occurring
including manufacturing business services means that the second of the year
is a little bit more questionable
and the whole view of the early rate hikes from country is way
premature and the risk of cuts why we're not forecasting it
do remain.