Australia’s central bank (RBA) announced a small cut in consumer spending and economic growth, this is the fourth cut this year. The reserve bank of Australia blamed a combination of drought, high taxes and low investment for continuing weak incomes.
Unconventional monetary policy may be in advance
The reserve bank of Australia said it was weighing the possibility that “further easing may inadvertently convey too negative a view on the economic outlook” and could move forward with unconventional monetary policy, the Australian financial review reported Tuesday.
While the rba said “the outlook for the Australian economy has not changed much since the August statement,” the outlook for consumption, inflation, housing investment and business investment has changed to varying degrees. In a broad reassessment of the economy, the rba said housing construction would fall further than first expected this year, down 11.3 per cent, compared with a previous forecast of a 7 per cent decline.
Consumption and economic growth are weak
The rba also revised down its forecast for business investment growth to 3.2 per cent this year, but forecast that business investment would recover at 6.9 per cent next year, up from 5.6 per cent previously. Consumption and weak economic growth are two key indicators closely watched by the Morrison government, according to the rba.
The rba cut its forecast for household consumption growth to 1.4 per cent and forecast it would rise to 1.9 per cent in the first half of next year. Meanwhile, Australia’s central bank cut its forecast for economic growth this year to 2.3% from 2.4%. Australia’s central bank also cut its growth forecast for the middle of next year to 2.6 percent from 2.7 percent.
Weak wage growth is bad for inflation
Notably, the rba cited “reduced agricultural income due to drought, reduced income from housing-related operations and strong tax growth” as reasons for the weak income growth. The rba’s forecast for wage growth has weakened slightly, suggesting it will fall to 2.2 per cent this year from 2.3 per cent.
https://yeeyi.com/news/index.php? App = home&act = article&aid = 270579