The Reserve Bank of Australia cut its forecasts for economic growth and inflation for the next two years as financial turmoil abroad makes businesses more reluctant to hire and consumers wary about spending.
“The mining-related parts of the economy are growing strongly,” the central bank said today in its quarterly monetary policy statement. “In contrast, in a number of other industries, the high exchange rate, the fading injections from the earlier fiscal stimulus and changes in household spending and borrowing behavior are contributing to subdued conditions.”
The RBA sees growth of 4 percent in the 12 months to June 30, 2012, down from its Aug. 5 estimate of 4.5 percent. Consumer prices will rise 2 percent over the period, from a previous prediction of 2.5 percent; underlying inflation is predicted at 2.5 percent from a previous 3 percent, the central bank said. The estimates are based on the overnight cash rate target remaining unchanged, it said.
The revisions reflect heightened volatility in financial markets and risks to global growth from Europe’s sovereign-debt crisis that allowed RBA Governor Glenn Stevens to lower Australia’s benchmark interest rate this week for the first time in 31 months. Stevens joins Group of 20 counterparts from Frankfurt to Jakarta to Brasilia in easing monetary policy to bolster domestic demand and employment.
