Dec 4 2024: The Australian dollar fell sharply on Wednesday following weaker-than-expected GDP data, which heightened expectations of an earlier rate cut by the Reserve Bank of Australia (RBA).
The AUD/USD pair dropped 1.1% to $0.6411 by 22:30 ET (03:30 GMT).
Australia’s third-quarter GDP grew 0.8% year-on-year, below forecasts of 1.1% and slower than the previous quarter’s 1%. Quarter-on-quarter growth reached 0.3%, also missing estimates of 0.5% and falling short of the RBA’s forecast.
The weaker growth was largely attributed to subdued private spending, as high inflation and elevated mortgage rates dampened consumer activity. Declining commodity export prices, coupled with tepid overseas demand—particularly from China—added further pressure.
This data reinforced speculation that the RBA might begin easing monetary policy sooner than anticipated. Analysts noted that the interest rate market now expects a 25-basis-point rate cut as early as April 2025, compared to earlier projections for May.
While the RBA has maintained a stance of keeping interest rates high to combat inflation, the GDP miss may prompt a reassessment. Despite October’s consumer inflation data showing levels above the bank’s 2%-3% target range, the slowing economy could drive a shift in priorities.
Major banks, including ANZ and Westpac, forecast the RBA to start cutting rates by May 2025, with Capital Economics predicting the start of an easing cycle in the second quarter of next year.
