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Australia Needs Sustained Weak Demand to Bring Down Inflation -- Market Talk
0654 GMT - Australia's economy is operating at around full employment or full capacity, which is creating excessive price pressures despite weak demand, say HSBC Global Research economists Jamie Culling and Paul Bloxham in a note. The country's weak economic growth is a clear sign that the Reserve Bank of Australia's tight monetary policy is slowing demand in the economy. However, the GDP numbers also provide evidence that the economy's supply side has been weak too, they say. A constrained supply side that is still affected by the long-tail effects of the pandemic means that a sustained period of weak demand will be needed to bring inflation down to target, they add. HSBC's central case is that the RBA won't cut its cash rate until 2Q of 2025.
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