SYDNEY: Australia’s central bank lowered near-term growth forecasts Friday after a rare contraction in the September quarter, but stayed positive about the economic outlook as the International Monetary Fund warned of risks ahead.
The Reserve Bank of Australia slashed the growth figures for the year ending June 2017 by one percentage point to 1.5-2.5 percent following a 0.5 percent contraction in the third-quarter of last year.
“Some of the factors weighing on reported GDP growth in the September quarter were temporary and have not materially affected the outlook for growth,” the RBA said in its quarterly Statement of Monetary Policy.
“Overall, year-ended GDP growth is forecast to pick up as the drag from mining investment and effects from the earlier fall in the terms of trade dissipate.
“GDP growth is forecast to increase to 2.5-3.5 percent in late 2017, and to be above potential for most of the forecast period.”
Australia has avoided a recession for more than a quarter of a century. But the economy has charted a bumpy course in recent years since the end of the mining investment boom.
The RBA has eased rates by 300 basis points since November 2011—including two cuts in 2016—to support growth in non-resources industries.
Even so, non-mining business spending has been soft, with the outlook tipped to be “relatively subdued in the near term”, the central bank added.
The IMF said in a report released Friday that the Australian economy was resilient and enjoyed strong policy frameworks.
But it warned of “significant risks and uncertainties” ahead, including the rise in protectionist policies in the global economy and a significant slowdown in Australia’s main trading partners.
Analysts said the RBA was likely to remain on the sidelines at this stage amid its expectations of a rebound in GDP figures.
“The outlook still contains some vulnerabilities—consumption and dwelling investment to name two—suggesting to us that the RBA will need to be alert and sensitive to the downside,” National Australia Bank economists David de Garis and Tapas Trickland said in a note.
“For now, reasonably positive data and prospect of a bounce back growth in Q4 is keeping the RBA on the sidelines.”