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Our Blog

Australia's transition continues

22 July 2015
Australia, RBA

The Australian economy is still experiencing a very challenging transition with the end of the mining investment boom.  Australia’s economic growth has been modest with real GDP expanding by only 2.3% for the year to March 2015. The NAB Business and Melbourne Institute Consumer Sentiment surveys have displayed subdued readings this year.

The Reserve Bank of Australia (RBA) has responded to this milder economic activity by lowering the cash interest rate to a historical low of 2.0%, where it has been since May 2015. The RBA justified the interest rate cuts given the expected weakness in business capital expenditure in both the mining and non-mining sectors over the coming year. It judged that the Australian economy is therefore likely to be operating with a degree of spare capacity for some time yet.

Low interest rates, rising wealth and solid population growth should support consumer spending and housing. Non-mining investment should gradually rise and serve as a counterweight to falling mining investment. Mild price pressures from the falling Australian dollar in 2014 and early 2015 should ensure that headline inflation edges back to the mid-point of the RBA’s 2% to 3% inflation target by the end of 2015.

Low interest rates, rising wealth and solid population growth should support consumer spending and housing.
This blog post has been prepared to provide general information and does not constitute 'financial advice' for the purposes of the Financial Advisors Act 2008 (Act). An individual investor should, before making any investment decisions, consider the information available in the relevant Product Disclosure Statement and seek professional advice. While every care has been taken in the preparation of this document, AMP Capital Investors (New Zealand) Limited and the AMP Group (together, 'AMP') make no guarantee that the information supplied is accurate, complete or timely and do not make any warranties or representations in respect of results gained from its use. The information is not intended to infer that current or past returns are indicative of future returns. The views expressed are those of the author and do not necessarily reflect those of AMP. These views are subject to change depending on market conditions and other factors.

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