CANBERRA: Australia’s central bank maintained its forecast of accelerating growth in response to easy policy, even as risks around key trading partner China cast a shadow over the regional economic outlook.
The Reserve Bank of Australia trimmed its inflation forecast for the year through June 2016 and its 2017 growth projections in a quarterly monetary policy statement Friday but it kept most of its estimates unchanged.
“A further increase in growth in household incomes and demand is anticipated, supported by rising employment, low interest rates and lower” gasoline prices, it said “The outlook for China’s growth is a significant uncertainty for the outlook for the Australian economy.”
Australia is benefiting from a depreciating local dollar that helps insulate the economy from shocks abroad and increases the competitiveness of local industries, whereas jurisdictions like Europe and Japan are struggling with their currencies. Policy makers kept rates unchanged at a record-low 2 percent Tuesday for a ninth month as they gauge the impact of recent financial market turbulence on global and domestic growth.
“If the RBA is going to be pushed off its 2 percent-perch it’s going to be from offshore headwinds, not domestically,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore, referring to what might drive a rate cut. “Domestically they seem very comfortable.” Traders are pricing in a better-than-80 percent chance the RBA will cut rates in the next six months. The Australian dollar was little changed from before the statement, trading at 71.93 U.S. cents at 12:45 p.m. in Sydney.
