A Look at Supporting Factors for Australian Economy and RBA’s Decision On Interest Rates

Recently, the Governor of Reserve Bank of Australia (RBA) had given the information related to the Australian economy outlook. He stated that downside risks have witnessed a rise but there are expectations that the economy of Australia would be encountering growth at a decent pace moving forward. The economy of Australia is supported by the robust growth with respect to the infrastructure investment as well as elevated deployments towards the other investment areas. Moreover, the labour market also happens to be robust. In the present year, the Australian economy would also be aided by the boost with respect to the exports of LNG (or Liquefied Natural Gas). In addition, issued release also stated that rise in the some of the prices of commodities as well as the lower exchange rate has been supporting the economy. As per the release, the central forecast might be expanded by approximately 3% over 2019 while, over 2020, it might be expanded by 2¾% with regards to the economy of Australia. However, there are anticipations that outcome would be a bit below 3% for 2018. 

The release also stated that the forecasts happen to be lower as compared to the previous ones which were released three months ago. The outcome, for 2018, is affected because of downward revisions with respect to the growth estimates earlier which was done by ABS (Australian Bureau of Statistics) as well as because September quarter witnessed soft number with regards to the GDP. With regards to 2019 as well as 2020, there has been a downward revision with regards to the forecasts by approximately ¼% which primarily implies marginal downgrade with respect to the household consumption as well as residential construction outlook.

We would now be having a look at the Monetary Policy decision which was given by the governor of RBA. In the latest meeting which was conducted by the Reserve Bank of Australia, the central bank of Australia had kept the cash rate unchanged. The cash rate happens to be 1.50%. The release stated that global economy had encountered the above-trend growth in 2018, however, the momentum got slow in H2 of the year. The issued release also mentioned information about the trade problems as it stated that trade worries are affecting trade on a global basis as well as some decision related to the investments. The growth with regards to the economy of China has been slowed and the authorities have been easing the policy. They are also paying attention towards risks which are in the financial sector.

The outlook for growth of the Australian economy happens to be helped by increased spending levels with respect to the public infrastructure as well as increased business investment. The release also gave some information about the housing markets. It stated that these markets in Sydney as well as Melbourne are witnessing the period of adjustment. The release also added that the credit conditions for some of the borrowers happens to be stricter.

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