Setting the stage for a November rate cut

The RBA stated yesterday than the upbeat growth of the March quarter had not flowed through to June, which is quite evident with the slowdown in export activity and also the performance between the mining and non-mining states. Although population growth continues to slow (which will weigh on growth in housing and consumer spending), there are some positives in that the currency is depreciating which was also flowing through to support activity in the services sector. However, while these improvement are constructive, there is simply not enough of them and those that there are are not growing fast enough to offset the mining investment cliff. The next big piece of data is the August capex data which is released in October and if this shows a large investment decline (which I believe it will), then the stage will be set for one further rate cut in November, which is the RBA’s favourite month for changing interest rate settings.