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164977
Tue, 03/01/2011 - 11:42
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Reserve Bank holds fire on rates
Economic growth is likely to accelerate smartly after an anticipated downturn from this summer's natural disasters, which will need to be managed through higher interest rates, economists say.
The Reserve Bank, as widely expected, left the cash rate unchanged at 4.75 per cent following Tuesday's monthly board meeting, a decision welcomed by Treasurer Wayne Swan.
"This will come as welcome news for many Australian families, especially those recovering from the summer's floods, cyclones and bushfire," Mr Swan said in a brief statement.
But National Australia Bank chief economist Alan Oster expects the central bank will need to lift rates twice later this year.
"The outlook for Australia is extremely good," Mr Oster told the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Outlook 2011 conference on Tuesday.
He said while consumers remain cautious, unemployment is likely to fall further to 4.5 per cent from its current rate of 5.0 per cent.
"If you believe as (the Reserve Bank) do that once you get below five (per cent) you start to generate wage pressures, then I think they basically are going to do some more," he said.
Reserve Bank governor Glenn Stevens gave few new clues in his post-meeting statement, saying monetary policy remained appropriate.
More fruitful were the latest forecasts from the government's commodity forecaster, which expects the economy to grow at an average annual rate of 3.9 per cent in 2011/12, up from 2.7 per cent in 2010/11.
ABARES also gave an upbeat outlook for commodity exports, despite the loss of $2.3 billion in damaged crops through floods and cyclone.
ABARES chief executive Phillip Glyde told the forecaster's conference farm exports were expected to rise by nine per cent to $31.2 billion in the current year, gaining another 4.4 per cent in 2011/12 to $32.5 billion.
"While the flood and cyclone impact were devastating, they weren't sufficiently large to knock down the recovery of the sector from 10 years of drought," Mr Glyde said.
Mineral resource exports are expected to be $186 billion in 2010/11, rising by 16 per cent to $215 billion in 2011/12.
"More records will continue to be broken in the minerals and energy sector," he said.
The impact of the floods appeared to be less damaging to retail spending than had been expected, according to new data released by the Australian Bureau of Statistics.
Spending rose by 0.4 per cent in January across the nation. In Queensland, surprisingly, it rose 0.3 per cent despite the summer floods.
Food retailing led the way with a 2.5 per cent increase in the month, although the jump could have been partly due to higher food prices.
Economists also got the final components for Wednesday's national accounts for the December quarter, a mixture of higher-than-expected government spending with zero growth input from exports.
Economists' forecasts centre on growth of around 0.6 per cent for the December quarter, a modest pick-up from just 0.2 per cent in the September quarter.
This will keep the annual rate of growth around 2.7 per cent.
"Whatever the national accounts say, we know our economic fundamentals are sound. We have strong public finances, low unemployment and strong business investment," Mr Swan said.
The Reserve Bank, as widely expected, left the cash rate unchanged at 4.75 per cent following Tuesday's monthly board meeting, a decision welcomed by Treasurer Wayne Swan.
"This will come as welcome news for many Australian families, especially those recovering from the summer's floods, cyclones and bushfire," Mr Swan said in a brief statement.
But National Australia Bank chief economist Alan Oster expects the central bank will need to lift rates twice later this year.
"The outlook for Australia is extremely good," Mr Oster told the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Outlook 2011 conference on Tuesday.
He said while consumers remain cautious, unemployment is likely to fall further to 4.5 per cent from its current rate of 5.0 per cent.
"If you believe as (the Reserve Bank) do that once you get below five (per cent) you start to generate wage pressures, then I think they basically are going to do some more," he said.
Reserve Bank governor Glenn Stevens gave few new clues in his post-meeting statement, saying monetary policy remained appropriate.
More fruitful were the latest forecasts from the government's commodity forecaster, which expects the economy to grow at an average annual rate of 3.9 per cent in 2011/12, up from 2.7 per cent in 2010/11.
ABARES also gave an upbeat outlook for commodity exports, despite the loss of $2.3 billion in damaged crops through floods and cyclone.
ABARES chief executive Phillip Glyde told the forecaster's conference farm exports were expected to rise by nine per cent to $31.2 billion in the current year, gaining another 4.4 per cent in 2011/12 to $32.5 billion.
"While the flood and cyclone impact were devastating, they weren't sufficiently large to knock down the recovery of the sector from 10 years of drought," Mr Glyde said.
Mineral resource exports are expected to be $186 billion in 2010/11, rising by 16 per cent to $215 billion in 2011/12.
"More records will continue to be broken in the minerals and energy sector," he said.
The impact of the floods appeared to be less damaging to retail spending than had been expected, according to new data released by the Australian Bureau of Statistics.
Spending rose by 0.4 per cent in January across the nation. In Queensland, surprisingly, it rose 0.3 per cent despite the summer floods.
Food retailing led the way with a 2.5 per cent increase in the month, although the jump could have been partly due to higher food prices.
Economists also got the final components for Wednesday's national accounts for the December quarter, a mixture of higher-than-expected government spending with zero growth input from exports.
Economists' forecasts centre on growth of around 0.6 per cent for the December quarter, a modest pick-up from just 0.2 per cent in the September quarter.
This will keep the annual rate of growth around 2.7 per cent.
"Whatever the national accounts say, we know our economic fundamentals are sound. We have strong public finances, low unemployment and strong business investment," Mr Swan said.
