Australia’s Economy Better Than Forecast, RBA Says
Australia’s economy is better than the central bank forecast a few months ago, helped by exports to China, the lowest borrowing costs in half a century, and government spending, said Assistant Governor Guy Debelle.
“Stimulus to our economy has been effective and we’re seeing some benefits from that,” Debelle said at a business luncheon in Melbourne today.
Policy makers left the benchmark interest rate unchanged at 3 percent two weeks ago for a third month amid mounting evidence Australia’s economy is rebounding from last year’s global financial crisis. Gross domestic product unexpectedly rose 0.4 percent in the first quarter, helped by consumer spending and agricultural exports. In May, the central bank forecast the economy would shrink 1 percent this year.
“Monetary policy and fiscal policy are really working here,” Debelle told the function organized by the Mortgage and Finance Association of Australia. “The economy is looking better than we thought it might a few months ago.
“Risks are more evenly balanced than they were.”
The central bank is due to revise its growth forecasts on Aug. 7.
Debelle’s comments reiterate what policy makers said in the minutes of their July 7 meeting released yesterday in Sydney.
Rate Cuts
“The early and substantial easing of both monetary and fiscal policy had been more effective in supporting demand, which if anything, had been more resilient than expected,” the minutes said.
Governor Glenn Stevens and his board cut the overnight cash rate target by a record 4.25 percentage points between September and April.
The interest-rate cuts and A$22 billion ($18 billion) in government cash handouts to low and middle-income households are helping the economy rebound from the financial crisis, recent reports suggest cash loan.
The jobless rate averaged less than 5.7 percent in the June quarter, below the 6 percent predicted by the Treasury department in May. Canberra-based Access Economics forecast yesterday that the unemployment rate will peak at 7.5 percent, a percentage point lower than the government’s prediction.
Housing Market
Debelle also said today that the housing market is rising as first-time buyers return to the market due to the interest- rate cuts and government grants.
Home-loan approvals to build or buy houses and apartments climbed 2.2 percent in May, the eighth straight month of gains. First-home buyers accounted for a record 29.5 percent of dwellings that were financed, up from 17.2 percent a year earlier, a report showed on July 8.
The government in May extended a grant of A$21,000 to first- time buyers of newly constructed homes to help cushion the nation’s economy against the worst global recession since the Great Depression.
Investors have increased bets Australia’s benchmark interest rate will be higher in 12 months, according to a Credit Suisse Group AG index based on swaps trading.
Traders forecast the key rate will be 88 basis points higher in a year, the index showed at 1:51 p.m. in Sydney. At the start of June, they forecast 3 basis points of reductions. A basis point is 0.01 percentage point.
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