It’s all so rosy

RBA has us on the up

Herald Sun - - BUSINESS - KA­RINA BAR­RY­MORE THE ECON­OMY ka­rina.bar­ry­more@news.com.au

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”.

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