One of the few economists to predict February's rate cut has backtracked on his call for three further cuts, saying the economy is not as weak as he thought.
Market Economics managing director Stephen Koukoulas says recent economic data, including job ad and consumer confidence, suggest signs of a pickup in the economy.
The housing market is also soaring, putting a limit on how low rates can fall before the RBA has a housing bubble on its hands.
He said the RBA was sounding less downbeat about the economy than he expected, while also being explicit about their concerns for the Sydney and Melbourne housing markets.
Mr Koukoulas now expects just one more cut, likely in March, taking the cash rate to 2.0 per cent.
"Maybe my 1.5 per cent was just over egging it a little bit, so I've just scaled that back," he said.
He also sees a change of direction for the Australian dollar, possibly heading back as high as 85 US cents, from its current level of 78 US cents.
It appears that the government may change its tune on fiscal policy, Mr Koukoulas said, swapping budget cuts for more spending, which would provide stimulus to the economy.
His change of heart was also spurred by tentative signs commodity prices have nearly bottomed out, and less bad news about the eurozone.
Westpac chief economist Bill Evans, another prominent economist who predicted February's rate cut, is also tipping a March cut, but said the RBA may wait for a month or two before cutting again.
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