(menafn – ecpulse) The Reserve Bank of Australia has announced the results for its meeting that held today, where the Bank downgraded the economic growth forecasts for the current year as weak labor market during the first quarter, beside the inflation rates curbed, supported the Bank to cut the interest rates by 50 basis points to 3.75% in May.
The Reserve Bank of Australia (RBA) acknowledged that many parts of the economy were struggling with a high local dollar and weak consumer demand, although it remained upbeat about the mining sector.
Moreover, the nation has released many economic indicators for March quarter that suggests that the economy grew at a modest pace. Measures of business and consumer sentiment are slightly below, long-run average levels, while indicators of future building activity remain at low levels.
The RBA expected that economic growth will grow by 3 percent in 2012, down from its February estimates of 3.5 percent. Consumer prices will incline 2.5 percent in the year to December, from a previous of 3 percent; underlying inflation is predicted at 2.25 percent from a previous 2.75 percent.
As for these forecasts, we can see that the growth in domestic demand is expected to slightly exceed its long-run average. This reflects the ongoing boom in mining investment, the outlook for which has been revised higher, adding this should spread to a number of other sectors.
The RBA said “the outlook for mining investment has been revised higher since its last statement as its liaison suggested some projects previously seen as only possible now look more likely to go ahead than had been previously assumed, and that work on some other projects is progressing at least as fast as was expected,”
The Reserve Bank of Australia unexpectedly cut the interest rate by half a percentage point for first time during the year as inflation rates curbed, and the Australian government wants to give momentum to support the recovery in the nation amid the European crisis impact.
On the other hand, Growth in China has moderated, as was intended, and is likely to remain at a more measured and sustainable pace in the future, where china has released today its manufacturing PMI for April that came better than the previous reading but lower than expected, but this reading is a great amid the current position for global recovery.