National Australia Bank's chief economist, Sally Auld is backing in the bank's prediction of a half a percentage point interest rate cut when the Reserve Bank meets on May 20.
She says in her opinion, it won't be a question of whether the RBA holds or cuts interest rates, rather, it's a question of the size of the rate cut.
She says NAB's argument for a double sized rate cut mainly revolves around the last RBA meeting taking place just before Donald Trump's Liberation Day tariffs came into effect and the news and economic cycle that followed. Now, the RBA would "simply be playing catchup" on getting back to a neutral setting.
Sally Auld joined The Business as NAB's monthly Business Confidence survey results were released for April, which revealed a sharp decline in capital expenditure, softer forward orders and a decline in the measure of profitability.
She said: "That's quite a worrying one, because what it tells us is that businesses are finding overall conditions quite challenging at the moment and that's being reflected in pressures on margins."
She says NAB will be watching profitability closely over the coming months, because "if we see further declines in profitability, then that might start to ring some alarm bells in terms of what that might imply for the labour market outlook."
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