NAB: Good business climate, expect rate cuts

Tuesday, 09. August 2016 07:43

The National Australia Bank (NAB) expects two more cuts in cash rate in the next 12 months, since prospects for inflation remain subdued.

"This will include two more 25-basis-point cuts in May and August 2017 – to a new low of 1 per cent – which should be enough to stabilise the unemployment rate, which is currently a concern for the RBA, at just over 5.5 per cent," said Alan Oster, NAB's chief economist.

Underlying inflation was expected to remain below the Reserve Bank of Australia's (RBA) target range of 2%-3%.

The comments from Oster come as the NAB published its business climate survey for July, which was conducted with 500 companies before RBS' rate cut on August 2.

"Despite the cacophony of events – including Brexit and the recent Federal election – that have posed a risk to market sentiment in the past month or so, firms are continuing to report positive levels of business confidence," said Oster.

Capital expenditures and forward orders were above long-term average, and sales were strong in July. Employment was also in line with June's gains.

 

Image: EPA / Mick Tsikas

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