Australia’s economy faces myriad headwinds that could trigger interest rate cuts from the central bank, taking borrowing rates further south from current historic lows.
“Leading indicators suggest that a case can be made for further cuts: Confidence is low and consistent with weak growth, inflation expectations are falling and the unemployment rate is rising,” Credit Suisse wrote in a note Friday, arguing that rates could fall to 1.5 percent.
Consumer confidence slumped over 12 percent on year in November, according to a joint survey from the Melbourne Institute and Westpac, marking the ninth straight month of pessimists outnumbering optimists – the longest slump since the global financial crisis. Meanwhile, Australia’s official jobless rate rose to a 12-year high of 6.2 percent in October.
Lower inflation also paves the way for rate cuts, Credit Suisse said. Headline consumer price inflation cooled to an annual 2.3 percent during the third-quarter, the lower end of the central bank’s 2-3 percent target band.
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