“The Reserve Bank of Australia reduced its economic growth and inflation forecasts as investment outside the mining industry remains elusive, the labor market softens and a high local currency contains prices.
“The soft outlook over the next year or so reflects a number of factors,” the RBA said in its quarterly monetary policy statement released in Sydney today. “Mining investment is expected to peak, both fiscal consolidation and the persistently high level of the Australian dollar will weigh on growth, and there is little sign of a near-term pick-up in non- mining business investment.”
The RBA noted that the global outlook has been “more positive in recent months” and China’s economy has stabilized. The RBA predicted “below trend” 2013 growth of about 2.5 percent, compared with around 2.75 percent forecast in November. Consumer prices will rise 3 percent in the year to June 2013, compared with the 3.25 percent increase it had forecast three months earlier, the central bank said.
Governor Glenn Stevens and his board reduced the overnight cash-rate target to 3 percent in December, matching a half- century low, as they try to revive industries including construction to rebalance economic growth and extend 21 recession-free years. The restrained outlook for prices gives scope for further rate cuts if needed to boost demand, the RBA reiterated in today’s statement after it paused this month.
