From Goldman Sachs’ analyst Tim Toohey (client note issued Wednesday):
Australian dollar to fall to 72 cents this year (prior forecast at 75 cents)
- Cites a faster-than-anticipated plunge in commodity prices
- Says these will leave Australia A$500 billion worse off in the next 10 years
- Says RBA to cut again in May … before beginning a hike cycle towards the end of 2016
- Their economic growth outlook for this year is unchanged at 2%
- But they are more pessimistic for the coming years. .. sees GDP +3.25 percent in 2016 (prior had a prediction of +3.6%), and for 2017 +3.5 percent (from 4%)
- Says continuing falls in commodities like liquefied national gas are likely to create a A$40 billion tax revenue shortfall over 4 years
- A return to surplus doesn’t look feasible any longer
- “The ongoing adjustment in both spot commodity prices and changes in our strategists’ longer term price forecasts require a reassessment of the impacts upon key economic indicators for Australia over the medium term”
- “The slower forecast path for real economic growth also suggests slower progress in closing the output gap, a contained inflation environment and low interest rates for a longer period than previously forecast”
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AUD/USD a little bouncy after the dip below 0.7750 earlier in the session:
