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N.R.: The RBA expects the Australian economy to go through a period of transition: away from a very intensive period of investment in the mining sector towards a new era. Therefore, the main question is whether it is a major problem for the nation's economy at the moment. I believe that it is not, because 5.6% is relatively low jobless rate compared to many other places in the world. I believe that in some ways the key question is the trajectory of unemployment. Moreover, the Australian jobless rate unexpectedly rose to 5.6 % in March, while the market was looking for the consensus of 5.4 %, relatively unchanged from the prior month. Thus, I think that it is not a major problem at the moment, but it is most certainly an area of concern.
A.H.: Our economists believe that the increase in the unemployment rate towards a three-year high that we have seen recently week was not due to a technical reason, it was just a fundamental weakness in the labour market.
Do you think the RBA will lower the rates or remain at the current level?
N.R.: We think that the Reserve Bank of Australia is now done with its rate cuts. However, in the near term it wants to maintain a bias to ease in order to keep confidence among the economic agents. I think the central bankers probably are at a point where, if they continue to evolve according to their forecast profile, they are unlikely to cut rates from here, but, obviously, they do think that in terms of where risks happen to be skewed right now. Domestic weakness, uncertainty over growth in China, coupled with what is happening in Europe and the regular uncertainty of the U.S. economy, probably implies that the prudent position in this environment is to maintain a bias ease.
A.H.: We expect that the RBA would cut its key interest rate in November 2013. We already had the forecast of the rate cuts before the unemployment report release, thus we can see that it is not the recent jobless data that has caused the rate cuts to be considered.
What is your forecast for AUD/USD and at the end of the second quarter?
N.R.: Our second quarter forecast for AUD/USD is 1.06, while for the third quarter we expect the pair to reach 1.08. We also anticipate AUD/USD to remain at the same level of 1.08 at the end of the year. Hence, we are still bullish on the Australian Dollar and we have actually maintained what we call ''an overweight'' waiting on the currency.
A.H.: At the end of June we anticipate AUD/USD to trade around 1.05.