Bushfires and economic outlook Analysts cut Their forecast for Australian GDP growth

The Australian dollar continued to slip into consolidation on Tuesday (January 14), largely ignoring the boost of a further pick-up in market risk sentiment. Day data showed that China’s trade in December both performed better than expected. The reason is that negative news about fundamentals in Australia has overwhelmed the external demand sector, and markets are more concerned about the impact of the country’s runaway wildfires on their economic fundamentals and the rise in expectations of future interest rate cuts by the Australian Federal Reserve.

With the RBA halfway through its chances of a rate cut in February, the negative sentiment has fully offset the external buoyal boost.

Bushfires and economic outlook Analysts cut Their forecast for Australian GDP growth

This means that the Aussie dollar still can not completely break through the 30-day moving average resistance to end the opening of the unilateral decline, and the country’s fire can be controlled as soon as possible will still largely be about the Australian dollar’s follow-up trend, short-term support in last week’s low of 0.6850, after the loss will open a wider range of downside space.

NASA says smog from Australian bushfires will be “around the Earth for at least a week” before returning to Australia, where wildfires have reportedly burned for months, burning more than 2,000 homes and killing 28 people, the BBC reported. Nasa based on satellite images that show smoke from the fire sprons across the Pacific Ocean, across South America, and “around the Earth for half a week” by January 8. NASA said the smog is expected to orbit the Earth for at least a week and return over Australia. Experts say climate change has exacerbated the scale and intensity of the fires, with more than 100 fires still understood to be burning in eastern Australia, although cooler weather and rain are expected in recent days, which could help put out the fires.

Analysts cut their 2020 growth forecasts as the worst bushfire in history dented already shaky consumer confidence, added to the spending burden and offset the impact of the cut. Analysts polled expect Australia’s gross domestic product to grow by 1.8 per cent in 2019, down from the 1.9 per cent forecast in the previous survey and 2.7 per cent in early 2019.

Analysts expect Australia’s GDP growth to rise only slightly to 2.3 per cent in 2020, down from the 2.5 per cent growth forecast in the previous survey. Australia’s GDP growth forecast remains unchanged at 2.5 per cent in 2021, but remains below the trend of 2.75 per cent. Australia’s economy has slowed to grow by just 1.7 per cent in the year to September, before bushfires raged in the east and south of the country.

Consumers are already in a Scrooge mentality with years of below-average wage growth and record levels of debt, and there are signs of further spending cuts over the Christmas period. The RBA’s three rate cuts have failed to boost consumption, in part because households believe that policy easing means the economy is in big trouble. Markets are betting that the RBA will cut interest rates by another 25 basis points in the first half of the year to a record low of 0.5 per cent. Surveys suggest the RBA will cut interest rates in the first quarter.

Michael Blythe, chief analyst at Commonwealth Bank of Australia, said the negative impact of bushfires in Australia would be more lasting than other disasters such as flooding. This negative impact is exacerbated by extreme dry weather, which is putting pressure on most regions, particularly the agricultural sector.

National Australia Bank expects inflation to be 1.4 per cent in Australia in 2020, 1.5 per cent in 2021 and 1.6 per cent in 2022. The Commonwealth Bank of Australia believes the pound fell to a 200-day moving average of 1.2691 against the dollar due to slow growth in UK gross domestic product and the possibility of a rate cut by the central bank.