The Reserve Bank of Australia has cut its growth and inflation forecasts as non-mining sectors struggle under the weight of a high Australian dollar.
In forecasting marginally lower growth rate of 3 per cent for 2012 and 2013, the RBA has signalled that earlier predictions were overly optimistic. The central bank's latest quarterly statement on monetary policy comes three days after it cut the official cash rate by 50 basis points because of lower inflation and the need to stimulate parts of the economy.
"Although three months ago a range of indicators were suggesting that economic growth was close to trend, the outcome for 2011 as now reported was, in fact, somewhat weaker than that," the statement said. In the previous statement, issued in February, the economy had been forecast to grow at 3 to 3.5 per cent.
Federal Treasurer Wayne Swan says the statement indicates Australia's economy is strong, and he remains committed to delivering a budget surplus next week.
"We've got contained inflation, we've got solid growth, we've got growth around trend, and we've got record levels of mining investment," Mr Swan said.
"Now this is in stark contrast, as the Reserve Bank points out, to conditions in most other developed economies." The Reserve Bank expects employment growth to "remain subdued" in the near term and has cited the high Australian dollar as a key pressure
"There is the possibility that in the near term, labour shedding across a range of industries outside of the mining sector accelerates as firms continue to adjust to the high exchange rate, weaknesses in the property market and the effects of weaker public demand." And as the dollar bites, Prime Minister Julia Gillard has announced plans to hold an economic forum in June to discuss the economic impact of the strong currency.
The Reserve Bank also pointed to a subdued housing market and says "a recovery in housing construction is unlikely in the near term".
"What remains is for buyers to reach a point where they have sufficient confidence to commit to contracts for construction of new dwellings and for the supply side of the housing market to be responsive to demand," the RBA said.... ABC business editor Peter Ryan and staff
By business editor Peter Ryan and staff
In forecasting marginally lower growth rate of 3 per cent for 2012 and 2013, the RBA has signalled that earlier predictions were overly optimistic. The central bank's latest quarterly statement on monetary policy comes three days after it cut the official cash rate by 50 basis points because of lower inflation and the need to stimulate parts of the economy.
"Although three months ago a range of indicators were suggesting that economic growth was close to trend, the outcome for 2011 as now reported was, in fact, somewhat weaker than that," the statement said. In the previous statement, issued in February, the economy had been forecast to grow at 3 to 3.5 per cent.
Federal Treasurer Wayne Swan says the statement indicates Australia's economy is strong, and he remains committed to delivering a budget surplus next week.
"We've got contained inflation, we've got solid growth, we've got growth around trend, and we've got record levels of mining investment," Mr Swan said.
"Now this is in stark contrast, as the Reserve Bank points out, to conditions in most other developed economies." The Reserve Bank expects employment growth to "remain subdued" in the near term and has cited the high Australian dollar as a key pressure
"There is the possibility that in the near term, labour shedding across a range of industries outside of the mining sector accelerates as firms continue to adjust to the high exchange rate, weaknesses in the property market and the effects of weaker public demand." And as the dollar bites, Prime Minister Julia Gillard has announced plans to hold an economic forum in June to discuss the economic impact of the strong currency.
The Reserve Bank also pointed to a subdued housing market and says "a recovery in housing construction is unlikely in the near term".
"What remains is for buyers to reach a point where they have sufficient confidence to commit to contracts for construction of new dwellings and for the supply side of the housing market to be responsive to demand," the RBA said.... ABC business editor Peter Ryan and staff
By business editor Peter Ryan and staff
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