AFP, Sydney :
Pressure is building on Australia’s central bank to cut interest rates from their record lows as growth in the resources-driven economy, already faltering on the back of China’s slowdown, takes a further hit, analysts say.
The Reserve Bank of Australia (RBA) has repeatedly said it will continue to maintain a “period of stability in interest rates”, but softening GDP growth figures last week sparked a flurry of economists forecasting further monetary policy easing.
That would take the cash rate below 2.5 percent, where it has been for 16 months.
“The GDP read… is creating a very dark shadow over the state of the Australian economy with income growth now in recession,” IG markets strategist Evan Lucas said.
The data showed the economy expanded by just 0.3 percent in the third-quarter, far below consensus estimates of 0.7 percent, to take the annual growth rate to a below-trend 2.7 percent.
“The pressure on growth in 2015 is ratcheting up as key commodities remain in bear markets and if housing cools, this will only accelerate,” added Lucas.
The slowdown in China, Australia’s largest trading partner, is already weighing on the resources sector and hurting the wider economy.
Continuing fears about the health of the world’s second-largest economy, which helped fuel Australia’s unprecedented mining investment boom, has been reflected in the local dollar’s high sensitivity to fluctuating Chinese data.
Pressure is building on Australia’s central bank to cut interest rates from their record lows as growth in the resources-driven economy, already faltering on the back of China’s slowdown, takes a further hit, analysts say.
The Reserve Bank of Australia (RBA) has repeatedly said it will continue to maintain a “period of stability in interest rates”, but softening GDP growth figures last week sparked a flurry of economists forecasting further monetary policy easing.
That would take the cash rate below 2.5 percent, where it has been for 16 months.
“The GDP read… is creating a very dark shadow over the state of the Australian economy with income growth now in recession,” IG markets strategist Evan Lucas said.
The data showed the economy expanded by just 0.3 percent in the third-quarter, far below consensus estimates of 0.7 percent, to take the annual growth rate to a below-trend 2.7 percent.
“The pressure on growth in 2015 is ratcheting up as key commodities remain in bear markets and if housing cools, this will only accelerate,” added Lucas.
The slowdown in China, Australia’s largest trading partner, is already weighing on the resources sector and hurting the wider economy.
Continuing fears about the health of the world’s second-largest economy, which helped fuel Australia’s unprecedented mining investment boom, has been reflected in the local dollar’s high sensitivity to fluctuating Chinese data.
