Australian Regulators Are Closely Monitoring Market Volatility
The Council of Financial Regulators, chaired by RBA Governor Michele Bullock, said Wednesday 'that a period of uncertainty would likely persist for some time,' according to a statement. Treasurer Jim Chalmers also attended the meeting.
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US dollar collapse sparks rate cut hopes
A 'couple of storm fronts coming out of the US' has seen the Australian dollar soar in recent weeks, adding further pressure on the RBA to cut interest rates. Australia's dollar hit an eight month high against the US dollar on the back of greenback having its worst start to a year since 1973. A host of economic policies, which is adding to a budget deficit already running at 7 per cent of GDP, has investors in the US dollar fearing it will be unable to pay its money back. Webull securities Australia chief executive Rob Talevski said the RBA will be closely watching the fallout from the latest Trump development. 'We have a couple of storm fronts coming out of the US in the scene of the big beautiful bill but also a depreciating US dollar and questions of the independence of the Fed. 'This obviously has ramifications for the rest of the world and one the RBA will be taking note of. 'Ultimately, the RBA will be cautious, but for the short-term there's plenty of reasons for the RBA to cut in July,' he said. DRAG ON THE AUSSIE ECONOMY While a rising Aussie dollar against the US is good for travellers and those buying from overseas, it could have a massive impact on the Australian economy. Australia's three major sectors are raw materials exports, tourism and international education at universities which all come under pressure with a rising Australian dollar. While conceding a couple of rate cuts won't alone solve Australia's economic problems, Mr Taleski says it adds to a chance of a rate cut 'Obviously the Australian dollar is a commodity dollar and that is the sector that will be impacted. 'We've already seen a slowdown in tourism and international education with a strengthening Aussie dollar likely to harm us. 'It is definitely something the RBA will be monitoring closely. According to Mr Talevski combined the falls in mining revenues, tourism and education will see the Australian economy stall over the next 12-months. He also opines this adds more pressure on the RBA which would be wise to consider the mounting risk that a falling US-dollar has on the global economy. 'Brand USA has been an impeccable defence in the face of mounting economic challenges in recent decades – sustaining global investor trust throughout the massive post-GFC monetary expansion and a deteriorating fiscal trajectory is not a luxury that would be afforded to any other country on earth,' he said. Mr Talevski said the RBA acting a bit quicker and cutting rates in July could help with some of the pain from a higher Australian dollar. 'If we look back and analyse the RBA historically, the main criticism is that they are very slow to react whether it is increasing or decreasing monetary policy.' 'Information flows really quickly whether it is good or bad so reactions from that need to be a lot quicker than we've seen the RBA perform. BIG BEAUTIFUL BILL The latest storm facing the US dollar US President Donald Trump's passing his signature bill through the US House of Representatives by four votes on Friday overnight. Dubbed the 'big beautiful bill' will do a host of things including fund a crackdown on immigration, pass his 2017 tax cuts, no more taxes on tips, cut credits or clean energy and EVs, state and local tax deductions as well as cut social safety net programs. Republicans said the legislation would lower taxes for Americans across the income spectrum and will help spur on economic growth. Critics say it gives the top 1 per cent of US households with incomes of more than $917,000 will get a $66,000 tax cut or about 2.4 per cent of their income. Going along with the bill will be cut to medicaid and food stamps meant for lower income earners. Overall the tax cuts will add $US3.4 trillion to the national debt between 2025 to 2034, adding to the US current $36.2 trillion national debt according to the nonpartisan Congressional Budget Office. Mr Trump cheered the passing of the big beautiful bill on Truth Social. 'One of the most consequential Bills ever. The USA is the 'HOTTEST' Country in the World, by far!!!' Mr Trump wrote. AMP chief economist Shane Oliver said the economic impact of this bill will be ambiguous. 'On the one hand the tax cuts likely provide a supply side boost to the economy, partly offsetting the negative supply side impact of the tariffs,' he wrote in his economic note. 'It may provide some near-term stimulus via the front loading of tax cuts but again this is at least partly offset by the tariffs. 'And with the income tax cuts being skewed to the rich (who don't change their spending much) and the spending cuts skewed to low-income earners it may mean that it could act as a drag on growth.' But over the longer-term Dr Oliver conceded it will add further pressure on the federal debt levels. Error in retrieving data Sign in to access your portfolio Error in retrieving data
Bloomberg
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Rupee Bond Binge by Indian Firms Poised to Slow After Record Run
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Yahoo
a day ago
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RBA expected to cut rates for third time on July 8 as economy slows: Reuters poll
By Devayani Sathyan BENGALURU (Reuters) -Easing inflation and a slowing economy will prompt the Reserve Bank of Australia to ease policy more than predicted in May, according to a Reuters poll of economists who expect the central bank to deliver a third 25 basis point rate cut on Tuesday. Financial markets and economists had previously forecast three RBA rate cuts this year but then in May raised their projections to four and now see five, a shift driven by inflation falling faster than expected and a weakening growth outlook. A strong majority of economists, 31 of 37, predicted the RBA will cut its official cash rate by 25 basis points to 3.60% at the end of its two-day meeting on July 8. Six expected no change, the survey showed. "The May meeting was notably more dovish in the outlook and that's going to manifest in cutting in July. I suspect the RBA will keep the option open for further easing and that's why there will be a follow-up cut in August," said Philip O'Donaghoe, chief economist for Australia and New Zealand at Deutsche Bank. "The post-COVID inflation surge is pretty much entirely out of the economy. And so the RBA's task now is to make sure we can get the growth that will keep the labour market strong...(so) the risk is we see more cuts." Over 60% of respondents in the June 30-July 3 Reuters poll, 23 of 36, forecast another quarter-point cut this quarter, taking the cash rate to 3.35%. While the median forecast pointed to a year-end cash rate of 3.10%, there was no clear consensus among economists on where the rate would end 2025: 16 of 33 projected 3.10%, 15 expected 3.35%, one each saw 3.60% and 2.85%. Australia's major banks - ANZ, CBA, NAB and Westpac - were similarly split, underscoring the uncertainty around the final leg of the RBA's easing cycle. The economy is forecast to grow 1.6% this year and 2.3% in 2026, a downgrade from 2.0% and 2.4% from the April poll, the poll predicted. Official data showed the economy expanded just 0.2% in Q1 2025, a slowdown from 0.6% in Q4 2024. "A large part of the reason why the RBA has now found itself on a rate-cutting path that's steeper than what it would have thought at the beginning of the year is has been softer than the RBA anticipated," said Luci Ellis, chief economist at Westpac. Some economists flagged the lack of a trade deal ahead of the July 9 expiry of a 90-day pause on U.S. President Donald Trump's sweeping tariffs on trading partners announced in April as a downside risk to the economy and RBA rates. "If some of those global through into more precautionary saving from households, then that could spur the RBA to deliver a little bit more support," said Taylor Nugent, senior economist at NAB. Inflation, which cooled to 2.1% in May from 2.5% at the start of the year, was expected to average 2.6% in 2025 and 2.7% in 2026. That is within the RBA's 2-3% target band but near the upper bound. Despite deeper rate cut expectations, the Australian dollar has gained over 6% so far this year, lifted by broad U.S. dollar weakness, and was forecast to strengthen about 2% over the next six months, a separate Reuters poll found. (Other stories from the July Reuters global economic poll)
