Australian Economy - Latest Economic News from Australia

RBA interest rate cut

The Australian dollar remains under pressure this afternoon following a set of poor retail sales data.

The Australian dollar remains under pressure in the global FX space.

This follows news that Australian retail sales fell sharply by 0.8 pct m/m in July, disappointing market expectations for an increase of 0.2 pct.

The news comes ahead of tomorrow's Reserve Bank of Australia meeting, and there will be those questioning whether the RBA will not act. The past week has shown:

We have concerns over future growth of the all-important mining sector.
We have concerns about the retail sector
And this morning it was shown that China saw its manufacturing sector contract for the first time since November 2011 and only the second time since February 2009. 

But, analysts are saying the RBA is unlikely to act.

"There is very little chance of the RBA making any changes to Australian monetary policy settings at this week’s Board meeting (financial market pricing at the end of last week indicated a 12% probability of a 25bp rate cut this week)," note Bank of America Merrill Lynch Global Research.

ANZ Bank also believe "RBA board will leave the cash rate unchanged tomorrow at 3.5%. Due to the lags associated with monetary policy, the board are likely to wait and assess the impacts on the economy of earlier easing (around 100bps to lending rates). Nevertheless, we continue to expect the RBA will maintain an easing bias with a 25bps rate cut expected in November."

The outlook for retail sales will be somewhat supported by monetary policy and tax cuts associated with compensating households for the carbon tax.

"However, we expect households averse attitude to debt will see much of this addition to income saved or used to repay debt rather than spent. Further, we forecast the unemployment rate to drift higher over coming months, which will weigh on household incomes. Overall, the outlook for nominal retail sales is to remain slightly below long-term trend growth," say ANZ.