(21 December 2011 — Australia) Global economic growth is expected to stall in the coming year according to the Reserve Bank of Australia (RBA).The RBA’s comments keep the door open for more cash rate cuts in 2012, a follow up to its slashed rate cuts in December by 25 basis points.
In the minutes of the December meeting released on Tuesday, the central bank said that growing turbulence in the eurozone – and the flow-on effects on world markets – had been a dominating factor in the decision.
‘‘It seemed highly likely that the sovereign credit and banking problems would weigh heavily on economic activity there (in Europe) over the period ahead, and there was a non-trivial possibility of a very sharp contraction,’’ the RBA said in the minutes.
‘‘Overall, members concluded that growth in the world economy was likely to weaken over the coming year.’’
The RBA acknowledged a variation in strength across sectors, with notable drops in building approvals and continuing caution in consumer sentiment.