Australia cuts GDP forecasts

August 11, 2014 - 12:00:00 am

SYDNEY: Australia’s central bank cut its growth forecasts as it reinforced a “period of stability” in interest rates and highlighted the challenges the economy faces as it moves away from mining-led expansion.

The Reserve Bank of Australia lowered its GDP forecasts for 2014 and 2015 by 25 percentage points, and said the “key uncertainties” facing the economy included when and how large the fall-off in resources investment would be.

“The key uncertainties for the domestic economy continue to be centred on the timing and extent of the decline in mining investment and how this is balanced by the expansion of resource exports and the recovery in non-mining activity,” the RBA said.

In its quarterly Statement on Monetary Policy, the central bank projected economic growth to be about 2.5 percent in the year to December 2014, down from 2.75 percent forecast in May.

It estimated GDP to be about 2.0 to 3.0 percent in the year to June 2015, from the prior forecast of 2.25 to 3.25 percent. Near-term inflation expectations were revised lower after the government repealed carbon tax legislation. Consumer prices were tipped to rise by 2.0 percent instead of by 2.75 percent in the year to December 2014. The Australian dollar slipped by almost a quarter of a cent to about 92.45 US cents.