(13 February 2012 – Australia) The Reserve Bank of Australia (RBA) lowered its inflation and growth forecasts for the first half of 2012 due to uncertainty on Europe’s debt crisis.The RBA expects underlying inflation to be about 2.25 percent for the year to the end of June, 0.25 basis points lower than it forecast three months ago.
It has also lowered its forecast for GDP growth in the year to June to 3.5 percent from 4.0 percent.
The RBA said in its February Statement on Monetary Policy that uncertainty about Europe’s debt crisis had weighed on domestic household and business confidence.
While ongoing strong growth was expected in the mining sector, other parts of the economy, especially those affected by the high value of the Australian dollar, would continue to struggle.
‘‘Growth outside the mining sector is expected to remain below trend over the forecast period,’’ the RBA said. ‘‘In the building industry, conditions remain weak in both the office and home-building sectors.
‘‘The high level of the exchange rate is also weighing on trade-exposed sectors including manufacturing, tourism and education.’’
The RBA expects headline CPI inflation to drop below underlying inflation, to 1.75 percent in the first half of 2012, as last year’s spike in food prices continues to unwind, before lifting to 3.0 percent in the second half of the year.
It estimates the introduction of the carbon tax in the September quarter will account for about 0.7 percent of the headline inflation figure and 0.25 percent of underlying inflation in the final two quarters of 2012.