RBA Lowers Growth Forecast As Economy Softens

04 May 2012 17:00 - Victoria Wedderburn

RBA Lowers Growth Forecast As Economy Softens

The Reserve Bank of Australia has cut its growth and inflation prediction as non-mining sectors struggle under the weight of a high Australian dollar. The bank said overall growth had been weaker than expected. In the report the RBA said, “Employment barely grew over the year to March 2012, with large increases in jobs in mining and some service industries roughly offset by declines in manufacturing, accommodation and food services, and retail.” The RBA now expects the economy to grow by about 3% over 2012 and 2013, which is a significant drop from an earlier prediction of 3.5% in 2012 and up to 4% in 2013.

“The global outlook remains clouded by the sovereign debt problems in Europe,” the RBA said adding, “In east Asia, growth has slowed, partly reflecting weaker export demand as well as the earlier policy tightening. Growth in China has moderated, as was intended by the Chinese authorities, and is now running at a more sustainable pace.” The RBA said there could be more job losses outside of mining as, “Measures of business and consumer sentiment are at, or slightly below, long-run average levels, while indicators of future building activity remain at low levels.”