The Statement on Monetary Policy (SoMP) is released each quarter and it is closely watched for the updates to the RBA’s own forecasts. In the August SoMP, the “Outlook” section stated words to the effect of “global and domestic growth forecasts are little changed from May”. In November, the opening statement became “Domestic economic conditions have been a bit stronger than were expected in August”. In this latest SoMP, the Outlook section starts with the statement, “Domestic economic conditions have been a bit softer than were expected at the time of the November Statement.” As a result, the RBA has reduced its GDP and inflation forecasts and increased one unemployment rate forecast.
GDP growth in all the periods (see table) have both been reduced by anywhere from 0.25% (years to December 2019 and December 2020) to 0.75% (years to December 2018 and June 2019).
The RBA had previously expected inflationary pressures to emerge sooner but it has now accepted capacity constraints have yet to emerge. Inflation rates have been reduced in each of the forecast periods up to and including the year to June 2020. Underlying inflation rates have been trimmed from 2.0% to 1.75%.