Australia central bank hikes 2012 growth forecast

Australia's central bank upped its annual growth forecast Friday after a strong first half, but it warned that resources investment -- a key driver of the economy -- would peak by 2014.

The Reserve Bank of Australia (RBA) said it now expected growth of 3.5 percent for 2012, instead of the 3.0 percent forecast in May, with the domestic economy powering on at above-average pace in the first six months of the year.

Australia's mining-driven economy expanded 1.3 percent in the three months to March -- a result hailed as "remarkable" by the government given the cooling in China and Europe's woes.

Even if some of the March quarter growth is revised downwards when the next growth reading is released in September, the RBA said "the data currently suggest that growth in activity may have been above trend over the first half."

A solid rebound in household spending and continued strength in resource investment were seen as the main drivers.

Looking ahead, the bank warned that the boom in mining and energy-related spending was expected to peak "sometime in 2013-14" and begin modestly subtracting from growth over 2014.

"That peak is expected to occur somewhat earlier than previously thought," the RBA said in its quarterly outlook on monetary policy.

"Some resource companies have adopted a more cautious approach to investment opportunities currently under consideration... given the more uncertain global outlook."

Treasurer Wayne Swan welcomed the upbeat remarks, saying they confirmed that "our economy is currently travelling along better than expected."

He noted that mining investment remained strong and the impact of it tapering off would be roughly offset by faster growth in resources exports made possible by the expansions to production capacity planned or underway.

The RBA's inflation outlook was little changed at 2.50 percent for the year to December, compared with 2.25 percent forecast in May, and the bank said it saw the current official interest rate of 3.50 percent as "appropriate".

On the global front, the RBA said China's growth was expected to pick up slightly in the second half of the year "as recent easings in fiscal and monetary policies start to take effect".

But Europe continued to weigh heavily on the outlook as a "significant downside risk" and conditions were "expected to remain weak in the euro area for some time".

"As a result of the trade and confidence linkages from the below-trend growth in Europe and the United States, growth may be dampened in much of Asia," the bank said.

Though possible scenarios included "the exit of one or more economies from the euro area," the RBA said its forecasts assumed ongoing volatility in sentiment and financial markets without a "severe disruption" to the region.

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Ayungin dilemma Ramon Casiple - Parallaxis
    Ayungin dilemma

    China faces a dilemma in Ayungin Shoal and other contested areas. If it waits for the ITLOS—which may decide against it—it would have tacitly bound itself to UNCLOS and risk a rogue state reputation if it asserts its claim in the South China Sea. If its militarily acts now, it may face international isolation. …

  • 48 nabbed in biggest anti-trafficking catch in Bongao VERA Files - The Inbox
    48 nabbed in biggest anti-trafficking catch in Bongao

    By Jake Soriano, VERA Files Bongao, Tawi-tawi—A team of Marines and policemen intercepted around noon Thursday 48 people, 12 of them minors, believed recruited by a human trafficking syndicate for work in Malaysia. The arrest constitutes what advocates called the … Continue reading → …

  • Docs vow to pay right taxes, make peace with BIR VERA Files - The Inbox
    Docs vow to pay right taxes, make peace with BIR

    By Kiersnerr Gerwin Tacadena, VERA Files Leaders of the medical profession have made peace with their former adversary, the Bureau of Internal Revenue (BIR), and joined forces in a campaign to get doctors to pay the right taxes. BIR Commissioner … Continue reading → …

POLL
Loading...
Poll Choice Options