RBA To Cut Outlook For Australia’s Economic Growth?

30 April 2012 16:30 - Jack Stupple

RBA To Cut Outlook For Australia’s Economic Growth?

The Reserve bank looks set to cut its outlook for economic growth as Australia’s inflation rate plummets making the government’s anticipated budget surplus more difficult to achieve.

JPMorgan chief economist Stephen Walters predicts the bank’s quarterly economic statement will contain “material downgrades to both the growth and inflation,” particularly after a sharp fall in inflation was seen to 1.6% for the year to March. Lower inflation suggests a slowing demand for services and goods. Mr Walters said, “Last year’s surprisingly weak 2.3% growth rate makes it very unlikely the economic will meet the Reserve Bank’s 3.5% growth forecast for the year ended June.”

Economists have been pointing to continued weakened outside Australia’s booming resources sector. Retail sales struggled to grow more than 0.1% a month which is particularly worrying as they make up a quarter of gross domestic product. Also the pace of housing construction has been in decline since the end of 2010. Consecutive monthly trade deficits in January and February have raised doubts about the resilience of export growth and consumers and businesses are pessimistic.