Australia experiencing a structural fall in inflation - Westpac

Westpac Chief Economist Bill Evans wrote in its latest client note that he sees the low inflationary pressures to remain in Australia, underscoring his forecast that interest rates will stay on hold until 2020.

Key Quotes:

“It is reasonable to argue that Australia is experiencing a structural fall in inflation. 

Arguably, without the risk of overheating the housing market, interest rates would have been even lower in Australia in recognition of this structural fall and the disappointing progress in restoring inflation to the target range.

With rates on hold in Australia and the U.S. Federal Reserve continuing to raise rates, Australia’s cash rate is set to fall below the Federal Funds rate by March.

By end 2018, it is set to be 63 basis points below the Federal Funds Rate, and by end 2019, 112 basis points below.”