Herald Sun - - BUSINESS - with Shane Oliver Shane Oliver is AMP Cap­i­tal’s chief econ­o­mist

THE Re­serve Bank now ex­pects the Aus­tralian econ­omy to grow by about 3.5 per cent on aver­age this year and next.

It ex­pects un­em­ploy­ment to fall to 4.75 per cent in 2020 and is more con­fi­dent in­fla­tion will rise.

Our view is the RBA is too op­ti­mistic and growth will be con­strained at about 2.75 per cent next year, be­cause the down­turn in hous­ing will con­strain growth with less build­ing and the per­ceived loss of wealth weigh­ing on spend­ing. We be­lieve house prices will have a top-to­bot­tom fall of 20 per cent in Syd­ney and Mel­bourne.

So we think a rate rise is a long way off and a cut later next year can’t be ruled out.

The RBA’s “op­ti­mism” high­lights al­though there are drags on growth, there are other things which will keep growth go­ing, such as in­fra­struc­ture spend­ing, busi­ness in­vest­ment, strong growth in ex­ports and fall­ing un­em­ploy­ment.

So a re­ces­sion in Aus­tralia re­mains as far away as ever.

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