|
(CEP News) - Speaking to the Australian parliament on Sunday night EDT, Reserve Bank of Australia governor Stevens said the outlook for the Australian economy is for subdued growth in the near term, and that over the next six months Australia will see a slowdown in inflation, with a gradual return to the RBA's target 2-3% inflation rate next year.
He said household spending and demand for credit has slowed, and also that the housing market has softened. He said that construction has at least seen an increase, but that "overall, households are at present much more cautious about spending and borrowing, after a number of years in which confidence levels were very high and there had been strong rates of growth in borrowing and spending." He also said that the surge in oil prices has had a dire affect on household spending as well as businesses. He said that concern over the financial crises seen in the U.S. has spilled a bit into Australia, and that loans to large companies has slowed in particular. Nevertheless, he said "overall, what we see in the Australian financial scene is an order of magnitude less troubling than what we see abroad." He also said that though household spending is on the decline, the domestic demand in the economy rose by 4% annually. He said he expects "weakish" growth in the near term. Turning to inflation, he said that inflation numbers will remain "uncomfortably high" for the next little while on price pressure due to raw materials prices. He said the third and fourth quarters may see a peak of about 5%, and afterwards start to fell backwards. He said going forward, monetary policy has to balance price and growth risk. During the question and answer period, Stevens said he did not have any agenda on rate changes and that it would be assessed on a month by month basis, and that unless something surprising happens they probably won't go up. Turning to the banking sector, he said that it is unlikely that banks will volunteer reductions in loan rates but that securitization will once again be a healthy feature of the system. He also said that overall, banks have to find funding in the market and not from central banks. He commented on the economy, saying that Australia is in a period of slow growth, not a recession, but that a recession isn't impossible. He said that household consumption is weaker and investment is stronger, but still, a low point of economic growth will come in one or two quarters. Turning to unemployment, he said growth in the labour market will slow and vacancies will decline. He also said unemployment could rise by 1.0% in the coming 12 to 18 months. In regards to international economies, Stevens said the situation is hard to predict. He said the mining investment will continue in Australia and that resource export volumes will pick up. He said that rate cuts in the future are a consideration for the bank. By Megan Ainscow,
This email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer. |
