Royal Commission presents a risk to growth

While there is still a lot of uncertainty, it seems likely that the Royal Commission into misconduct in the financial sector will lead to a tightening in credit conditions in Australia. A notable tightening in credit standards would weigh heavily on the already slowing housing market and the economy more broadly. So while our central forecast is that the Reserve Bank of Australia will keep interest rates on hold at 1.5% until the second half of 2019, if there is an appreciable tightening in conditions then lift-off may not occur until 2020.