RBA reports grim forecast
(8 August 2011 – Australia) The quarterly Statement of Monetary Policy released on Saturday delivered a grim forecast of low growth and high inflation.
This could force the Reserve Bank of Australia (RBA) to keep interest rates on hold for the rest of the year.
The RBA's economists have slashed the 2011 growth forecast from 3.25 percent to 2 percent.
The interbank futures market is tipping up to five interest rate cuts in Australia by April next year, but most economists rule this out.
The reduction is greater than expected by most economists.
The RBA predicts growth will bounce back in 2012. In May, it forecast that the economy would grow by 4.5 percent but that has been pared back to 4 percent.
The economy is then likely to grow between 3.75 percent and 4.5 percent.
'Growth over 2011 has been revised downwards due to a slower than expected recovery in coal production and, to a lesser extent, a downward revision to consumer spending as domestic and international concerns have weighed on sentiment,' the RBA report said.
'The medium-term outlook continues to be characterised by the significant pipeline of resource sector investment . . . and by strong growth in resource exports.
The report also said there is a large divergence between the mining and related sectors and the rest of the economy with the cautious behaviour of households, the unwinding of the fiscal stimulus and the high exchange rate weighing on a number of industries.
The RBA's economists have slashed the 2011 growth forecast from 3.25 percent to 2 percent.
The interbank futures market is tipping up to five interest rate cuts in Australia by April next year, but most economists rule this out.
The reduction is greater than expected by most economists.
The RBA predicts growth will bounce back in 2012. In May, it forecast that the economy would grow by 4.5 percent but that has been pared back to 4 percent.
The economy is then likely to grow between 3.75 percent and 4.5 percent.
'Growth over 2011 has been revised downwards due to a slower than expected recovery in coal production and, to a lesser extent, a downward revision to consumer spending as domestic and international concerns have weighed on sentiment,' the RBA report said.
'The medium-term outlook continues to be characterised by the significant pipeline of resource sector investment . . . and by strong growth in resource exports.
The report also said there is a large divergence between the mining and related sectors and the rest of the economy with the cautious behaviour of households, the unwinding of the fiscal stimulus and the high exchange rate weighing on a number of industries.
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