RBA cuts annual growth forecast to 1.5%2.5%

SYDNEY: The Reserve Bank of Australia has cut its economic growth forecasts after an unexpected fall in growth in the September quarter and a dip in household spending.

The central bank’s quarterly statement on monetary policy, released on Friday, forecasts growth of 1.5% to 2.5% in the year to June 30.

That is 1% lower than its forecast in November.

The RBA said the revision was largely due to a 0.5% fall in gross domestic product in the September quarter.

But it also counted weaker household spending, which accounts for about 60% of gross domestic product.

‘‘Subdued growth in household income is likely to continue to constrain consumption growth over the period ahead,’’ the RBA said.

‘‘The forecast for consumption growth has been scaled back a little to reflect recent data and a view that consumption is unlikely to grow materially faster than income over the next couple of years.’’

The RBA is open to a possible return to abovetrend growth by the end of 2017 but still cut its forecast for the next year.

The RBA now expects growth to be between 2.75% and 3.75% in 2018, down 0.25% from the previous forecast.

The central bank said a major risk to growth was if households became more pessimistic about the outlook and spent less in order to save more and service their debts.

It also made special mention of the potential policies of US President Donald Trump’s administration.

Personal and corporate tax cuts could boost growth and inflation in the US, with potential spillover into other economies.

However, the RBA warned there could be negative impacts from Mr Trump’s trade and immigration policies.

‘‘There is a rising risk that more restrictive and protectionist trade and immigration policies under a new administration could harm global growth prospects,’’ the RBA said.

The 2016 year GDP numbers will be released on March 1. — AAP