UBS's Scott Haslem was among the first economists to shift his rate hike profile back to the second half of the year, a little after Tim Toohey at Goldman Sachs, if I recall correctly. (Scott is one of the most watched and respected market economists going around.) Time, and, more pointendly, the intervention of an extraordinary number of White Swans (for we Aussies), has proven this to be a relatively good call, so far (see my post yesterday). As an aside, Westpac's Bill Evans also deserves credit for getting consumption, the household sector, and housing (with the help of Matthew Hassan) more generally, spot-on.
Scott's colleague, the cerebral rates strategist, Matthew Johnson (who is the most likely heir to the great Rory Robertson's now-vacated throne--Rory is advising the Treasury team at Westpac), has also been a little bearish on the economy, picking all of the low CPI prints, and the low Q3 and Q4 GDP outcomes. (Fwiw, I don't think Q4 was low as such: if you take the RBA's estimate of a 0.5ppt leakage in Q4 care of the floods, GDP would have printed 1.2% in the absence of these disasters, which is barnstorming territory.) Nevertheless, Matt in particular has hawked up a fair bit in 2011. This was his recommendation yesterday:
"The RBA is clear that the investment outlook is driving rates higher. It therefore follows that if investment disappoints, policy may be too tight. This seems like a small risk: the investment pipeline continues to grow. For example, on 18 April BHP announced a AUD48bn increase in their Port Headland Iron Ore facilities. A similar sized announcement from Chevron (the AUD42bn Gorgon project) presaged the move from a 3% cash rate in H2’09 – this new deal may presage the move to restrictive rates...
We recommend paying 6m OIS, starting on 3 August (to 3 Feb 2012) – currently 4.86%, target 5.05%, stop 4.75%. We expect the RBA to tighten policy twice in Q3’11 (+25bps in each of August and September)...
If the current ‘risk off’ theme develops, it’s possible that the Aussie short end will once again price in cuts. We recommend scaling into this trade to leave some room in case that happens once again. So long as the investment pipeline does not shrink (and it’s currently swelling) we are confident that the next move for the RBA’s policy rate is up."
