MNI Insight: Australia Macro Chart Pack - RBA Close To Peak, A$ Waiting For Softer Fed/Improved China Outlook

EXECUTIVE SUMMARY:

• The RBA appears on hold for now unless the economy moves in a way it is not expecting. But our model indicates that rate cuts are still some way off. Rate differentials within the $-bloc are expected to narrow over the coming year.
• Headline inflation is moderating towards the target band with July printing at 4.9% but core and domestically-driven measures are proving stickier, which is likely to continue to concern the RBA.
• Demand is slowing driven by households cutting back on spending due to higher rates and inflation weighing on budgets. The RBA is watching consumption and global developments closely. While China's growth has disappointed, Australia's exports to China are holding up.
• Commodity prices and global equities are suggesting that AUD/USD is undervalued but a more dovish Fed outlook coupled with improved China activity are likely needed to drive AUD/USD materially higher.

See full chart pack here:

Australia Macro August 2023.pdf