Australia likely to retain interest rate until late 2013: Capital Economics
2012-11-06 11:00:57
The Reserve Bank of Australia (RBA) will likely keep its policy interest rate unchanged at least until late 2013 to help counteract the slump in global demand and boost the country's non-mining sectors ahead of a peak in mining investment, Capital Economics Asia Economist Daniel Martin said Tuesday.
The firm, meanwhile, said it does not rule out one more rate cut in the next few months if global conditions take a sharp turn for the worse.
According to the economist, Australia's growth is unlikely to fall much below trend, with earlier monetary stimulus still feeding through into the economy. Underpinning the effects of the previous interest rate cuts on the economy, house prices increased further in the third quarter, while retail sales held up reasonably well.
Latest inflation data also show that underlying inflation is well contained, and third quarter's sharp rise in headline inflation was mainly due to the introduction of a carbon tax in July, the economist noted.
Capital Economics, meanwhile, sees Australia's mining boom cooling over the next year as falling commodity prices and a slowdown in China has threatened the sector.
Further on the negative side, the unemployment rate has risen to a near two-year high of 5.4 percent, and manufacturing new export orders collapsed on slowing global trade and a stubbornly strong Australian dollar.
The Reserve Bank of Australia unexpectedly kept its cash rate unchanged at 3.25 percent at its latest rate-setting session, after cutting by 25 basis points last month.