Rising dollar could buck growth
THE central bank has warned a soaring Aussie dollar could slow the pace of economic growth.
Reserve Bank of Australia Governor Philip Lowe said yesterday the board had decided to leave the official cash rate at 1.5 per cent, where it has now remained for 12 months.
He said the economy was expected to grow at an annual rate of 3 per cent for the next few years but stressed that may change should the Australian dollar continue to rise.
“The higher exchange rate is expected to contribute to subdued price pressures in the economy,” Dr Lowe said.
“It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick- up in economic activity and inflation than currently forecast.”
Dr Lowe also said consumption remains a source of uncertainty for the economy.
“Retail sales have picked up recently, but slow growth in real wages and high levels of household debt are likely to constrain growth in spending,” he said.