FED:RBA expecting strong growth in 2012

AAP General News (Australia)
08-17-2010
FED:RBA expecting strong growth in 2012

By Stephen Johnson

CANBERRA, Aug 17 AAP - The Reserve Bank is expecting inflation to remain under control
before economic growth surges to above-average levels next year, giving Labor a political
boost on the economy just days before the election.

Releasing the minutes of its August meeting, the central bank said global financial
market volatility made it "appropriate" to leave interest rates on hold.

The Reserve Bank of Australia (RBA) also said economic growth would strengthen in 2011
and 2012 to "above-average rates" even though consumers are still cautious.

Like Treasury, the RBA sees an expansion pace of up to 4 per cent by the middle of next year.

In another piece of good news for the government, the RBA is expecting inflation to
remain within the two to three per cent target band "over the next year or so".

The experts saw this as a sign interest rates would remain on hold at 4.5 per cent
in the short term.

"It is clear that the Reserve Bank is unlikely to move on interest rates until more
concrete economic data is available," Commonwealth Securities economist Savanth Sebastian
said.

"No doubt the new era of consumer conservatism and weak trading environment for retailers
would add weight to the argument for interest rates to remain on hold over the next few
months."

While the economy is expected to improve in coming months, the effects of three rates
rises in early 2010 are still hampering some sections of the economy.

The Australian Chamber of Commerce and Industry's (ACCI) small business survey for
the June quarter produced a negative reading, pointing to an uneven economic recovery.

"Small business in Australia is facing very difficult conditions at the moment," ACCI's
economics policy director Greg Evans told reporters in Canberra.

"That's on the basis of successive rate increases, the fact that the stimulus measures
are tailing off and continuing international instability."

ACCI's key small business conditions index fell to 47.4, slipping below the 50-level
separating an expansion from a contraction.

Another private survey from the Melbourne Institute showed a slowdown in wages growth
as a possible sign of a cooling economy.

Research fellow Edda Claus said the wages report for the August quarter suggested workers,
particularly women, were gloomy about their job prospects.

"This is in line with recent indicators that suggest that growth in the Australian
economy is slowing," Dr Claus said.

Prime Minister Julia Gillard and her deputy, Treasurer Wayne Swan, appeared together
in the Queensland mining town of Mackay on Tuesday promoting Labor's economic credentials.

Addressing about 50 workers gathered at a mining equipment firm, Ms Gillard appealed
to them to consider Labor's economic performance when they voted on Saturday.

"That election on Saturday is really about some very important things," she said.

"Mostly, more than anything else, it's about the strength of our national economy."

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KEYWORD: POLL10 ECONOMY WRAP

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