RBA Keeps Rate in a Less Optimistic Growth Outlook

The central bank of Australia maintained the interest rates at a record low on Tuesday, which is not surprising and it is gloom. It looks pessimistic enough for the economy to rise by 3 percent or more for the year. There are other hints that this would be sustained in the future months.

Analysts adjusted their forecast for the GDP in the fourth quarter on Wednesday and anticipated to have a change in rhetorics. A slow growth is presumed close to 0.5 percent from 0.6 percent in the previous quarter.

The annual growth will most likely decline to become tepid from 2.8 percent to 2.4 percent in the last quarter. Consumption has been low, as well as, wage growth since mid-2017. Net exports have been lower than the predicted figure of RBA and a total of these would result in a small figure.

Analysts are distributed fairly for a chance of a rate hike in December but interest rate futures are priced less at 25 basis points until early 2019.

Data on Australian Bureau of Statistics (ABS) release on Tuesday reflected a declined in rural exports and rise in consumer and oil imports that and removed 0.5 percentage points from the gross domestic product (GDP) for the quarter.

The central bank was aware of the slowdown in exports of the last three months in 2017 but this is just seen to be a transitory phase.

Making it worse, the retail sales increased by just 0.1 percent when analysts are aiming for a 0.4 percent gain due to weak retail clothing stores. Sales dropped by 0.5 percent in December.Consumer spending contributes to around 57 percent of the GDP value. Australia’s brick-and-mortar stores have had a difficult time amid a very tight competition with unceasing price discounts but still failed to attract customer resulting in a weak wage growth and large debt.

Strong spending by the Australian government has helped in balancing the drop of exports due to weather concerns.

The government spending of the data shows an increase of 1.7 percent in the fourth quarter to A$83.16 billion or $64.67 billion, which was influenced by inflation and raising its potential for further growth. The account deficit of the nation has largely expanded to A$14 billion or $10.89 billion for more than a year.

The Reserve Bank of Australia (RBA) anticipates the nation’s GDP to rise at a faster rate in 2018 compared last year disregarding the expected figure of 3 percent growth in the new few years.