RBA's current 3% growth forecast for FY16 pitches rate risks downside

The minutes from the October Board meeting emphasised that the Reserve Bank of Australia is comfortable with the outlook for the labour market and the apparent slowing in the housing market. 

It will take some time to assess the size and impact on the economy of any tightening in financial conditions that might be associated with independent increases in mortgage rates from banks. 

However the Board did highlight the importance of the global outlook and seems to be more downbeat on China. The risks to the current view that rates will remain on hold for the remainder of 2015 and 2016 are to the downside.

"A rate cut in early next year would require the Bank to be forecasting growth in 2016 to be 2.5% or less without a policy response. The Leading Index is signalling a somewhat lower growth outlook in the first half of 2016 than our 2.75% and the RBA's current forecast of 3% for the whole of 2016, pitching rate risks to the downside", says Westpac.