N
ational Australia Bank is predicting a significant interest rate cut, with 50 basis points to be shaved off in May and another 50 by August. This would amount to the equivalent of four rate cuts by the Reserve Bank by August.

    The bank's group chief economist Sally Auld said that if the RBA had known what it knows now, it would have likely lowered the cash rate at its last meeting and followed up with a further cut in May. The bank is forecasting 100 basis points of easing by August, which would be similar to responses to previous global shocks.

    Auld noted that price data shows inflation within the RBA's target band, and disinflation in market services. This should ease concerns about the impact of labor market dynamics on inflation. With monetary policy currently restrictive, Auld believes the RBA will need to take a more neutral stance quickly.

    The bank has also revised its GDP forecast down by 25 basis points to 2%, and lifted its peak unemployment rate forecast from 4.2% to 4.4%. NAB praises policymakers for handling global and domestic circumstances well, saying they have navigated a difficult backdrop effectively.

    Australia's limited export basket to the US (less than 5% of total exports) means it will be somewhat sheltered from potential tariff wars under President Trump.