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Monetary policy will remain restrictive for longer

Australia’s GDP growth will remain soft throughout the first half of the year so the recent stalling in inflation should be followed by a renewed moderation. However, as the labour market remains very tight, we’re pushing back our forecast for the first rate cut from August to November. That will make the RBA the last central bank in any major economy to ease monetary policy. And with economic activity set to gain momentum in the second half of the year as real household incomes grow again and unit labour cost growth set to remain high, we only expect three 25bp rate cuts by the RBA. By contrast, the case for looser policy remains more compelling in New Zealand and we expect the RBNZ to lower rates from 5.5% to 3.5% by end-2025.

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