Big balls call of the day: UBS's Matty Johnson

Hailing from mining heartland, UBS's Matthew Johnson is notorious for calling a one carat diamond nothing more than a tonne of compressed coal. And yesterday he proclaimed that the probability of an RBA rate hike in Q1 was "almost zero". This seems too aggressive from my Hawaiian vantage: while the likelihood of them going is clearly low--perhaps now sub 20%--there is way too much important data between now and March to scratch a hike altogether. The real question is this: have the floods changed the timing of the RBA's 2 year inflation forecast? I very much doubt it. Do they shift the inflation probabilities to the upside or downside. If pushed, I would guess the former. So from a decision-making standpoint, why write off Q1 hikes completely? We get the monthly unemployment reads in January and February, and Q4 inflation in January. The unemployment data is indisputably most significant. So while the base-case might be for steady or even modest increases in unemployment given the falling capacity utilisation data, employment growth has consistently surprised on the strong side. What happens if UE prints below 5% in both January and February, and core CPI is a little higher than folks expected? These are material probability events (say somewhere between 25-50% likelihoods). You would have to think a forward-looking and hawkish RBA worried about its inflation-fighting credibility has a decent chance of going in March if these things come to pass. The near-term upside risks are also heightened by the stronger than expected recoveries in the world's two largest economies, the US and China.