GDP outlook unchanged

But chances of rise in wages no closer, says RBA

THE Reserve Bank has kept its word and left its growth forecast unchanged through to the end of the year, while continuing to insist the GDP hit from bushfires, drought and the coronavirus outbreak will be short-lived.

However, chances of a pickup in wages have been ground further into the dust, even as the gradual improvement in unemployment is tipped to hasten. As it indicated three separate times this week, the central bank yesterday kept its growth forecast for the 12 months to December at 2.75 per cent. It also delivered an expected downgrade to the near-term outlook due to the summer fire and storm disasters. In its February Statement on Monetary Policy, the RBA said the economy would now grow by just 2.0 per cent for the year to December 2019, and 2.0 per cent for the year to June 2020 – down from 2.25 per cent and 2.5 per cent respectively as flagged in November.

RBA governor Philip Lowe (right) had indicated as much following the central bank’s decision to keep interest rates on hold at 0.75 per cent.

He repeated the forecast at the Press Club in Sydney on Wednesday and addressing the federal parliament’s House of Representatives economics committee in Canberra yesterday.

The RBA shocked economists in leaving the outlook for the year unchanged as concerns linger over the depth of the economic pain to come following a torrid summer of fires and, more recently, the coronavirus outbreak.

Dr Lowe’s opening remarks at yesterday’s hearing reiterated that Australia’s fundamentals remained strong.

The RBA statement shows jobs growth has been downgraded for the first half of the year, though is expected to pick up as the GDP improves.

The unemployment rate, however, will begin improving sooner than previously thought – albeit at a glacial pace.

The jobless rate for the year to December 2020 is now expected at 5.0 per cent from 5.25 per cent three months ago.

Unemployment in the year ending December 2021 is now expected to slow to 4.75 per cent from the previously stated 5.0 per cent.

Meanwhile, the lid remains firmly on wages growth – with no rise tipped for the foreseeable future and downgrades being made in both the near and long-term outlook.

The RBA moderated wage price index expectations for the year to December 2021 to 2.2 per cent from 2.3 per cent, with this figure set to remain through to June 2022.