According to the latest Westpac-MI index Australia’s economy is set to remain ‘weak’ for the end of 2014 and the beginning 2015, while a slide in commodity prices offset brighter news among consumers and in the housing market.
The Latest Westpac- Melbourne institute Index shows the pace of economic growth over the coming months decreased from 0.75% in July to 0.9% in August.
Chief economist Bill Evans shows his concern and stated “this is the seventh consecutive month where growth rate in the Index has been below trend”, and “we can expect growth in the Australian economy to remain below trends in the beginning of 2015”.
The Westpac analysis goes in accordance with the Reserve Bank of Australia’s view. At last month’s Monetary Policy meeting, the members noted in favour of “forecasts of a period of below-trend growth in economic activity meant that it would be some time before the unemployment rate declined consistently,” the meeting outcomes revealed on Tuesday.
“Overall we can conclude that commodity prices have intensified their drag on the growth rate,” said Mr Evans. “The slowdown in dwelling approvals has led to a reversal in the effect which that series is having on the index consumers are less nervous around the labour market.”
The Reserve Bank of Australia forecast suggest the economy is likely to have slowed down to an annualised rate of 2 percent over the second half od the year.
The RBA reaffirmed its position of unchanged interest rates as this would be the most prudent course.
There are no expectations on changes of the rates anytime soon, at least not until the second half of 2015 according to Mr. Evans.
