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NAB joins Australia's other 'big 4' in stepping up rate cut forecast

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By Reuters
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SINGAPORE (Reuters) – National Australia Bank <NAB.AX> lowered its 2020 forecast for Australia’s benchmark interest rate on Wednesday, citing sluggish economic growth and a lack of fiscal support, making it the last of the country’s big four banks to turn dovish.

The forecast follows data showing Australia’s third-quarter economic growth missed expectations and comes amid a government reluctance to buy its way to better growth through fiscal measures.

After the data, NAB, which previously forecast only one rate cut next year, said it now predicts two – in February and in June – which would take the cash rate to 0.25%.

“We think monetary policy will have to continue to do the heavy lifting given that there has been little response to date on the fiscal front,” NAB’s economists said in an emailed note.

“At this point, we see an increased risk of a move to ‘unconventional’ policy in H2 2020 should the labour market deteriorate more significantly than we forecast.”

Australia’s cash rate is currently at a record low of 0.75% after three cuts of 25 basis points since June this year.

The Australian dollar <AUD=D3> weakened slightly after NAB’s shift, but was already sold on Wednesday following the soft GDP data.

Westpac, ANZ and Commonwealth Bank – making up the rest of Australia’s quartet of big lenders – had each earlier turned dovish in the past week.

In a speech last week, Australia’s central bank governor said he did not expect to have to use quantitative easing in Australia, but that it could happen if the cash rate was cut to 0.25%.

(Reporting by Tom Westbrook; Editing by Sam Holmes)