It’s all so rosy
RBA has us on the up
AUSTRALIA has hit an economic sweet spot, with the latest monetary policy statement from the Reserve Bank painting a positive outlook for households and businesses.
Lower unemployment, gently rising inflation and stronger economic growth indicate interest rates are set to stay on hold for the near future, allowing households and companies to continue to spend and expand.
“The Reserve Bank has mapped out a situation of near economic nirvana,” Common- wealth Bank chief economist Craig James said yesterday.
“The Reserve has raised short-term economic growth forecasts, trimmed inflation forecasts and also trimmed forecasts for unemployment,” Mr James said.
“As always there are risks but it is hard to envisage a more beautiful set of numbers.”
In its quarterly statement on monetary policy released yesterday, the RBA indicated its cash rate would stay at around the record-low rate of 1.5 per cent.
It reduced its forecast for unemployment from 5.5 per cent down to 5 per cent for December 2018 and steady at 5 per cent for December 2019.
At the same time the outlook for gross domestic product was increased from 3.25 per cent annual growth to 3.5 per cent by December and 3.25 per cent next year.
Underlying inflation was also steady at 1.75 per cent at the end of this year and revised up from 2 per cent to 2.25 per cent for December next year.
However, AMP chief economist Shane Oliver said the nation’s central bank was talking up the economy.
“They’re too optimistic, too upbeat; maybe they have to be because they want things to improve and they don’t want to talk anything down.”
Digital Finance Analytics principal analyst Martin North also warned that the cash rate may have to be cut before it went up.
He said the RBA appeared to be “wearing rose-tinted glasses”.