RBA expects GDP growth to slow in 2013
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Australia's rate of economic growth is expected to slow in 2013 amid falling commodity prices and reduced investment in mining, the nation's central bank says.
The Reserve Bank of Australia on Friday revised its forecasts for gross domestic product (GDP) growth to three per cent in 2013, down from 3.75 per cent in 2012.
It had previously forecast GDP growth of 2.75 to 3.25 per cent in 2013.
The RBA's quarterly Statement on Monetary Policy attributed the revised forecast to reduced investment in mining as a result of fall in commodity prices.
"The downward revision to mining investment reflects the effect of the recent decline in bulk commodity prices on mining companies' cash flows and their plans for spending," the RBA said.
Forecast GDP growth for 2014 was also revised to a range of between 2.25 per cent to 3.25 per cent, down from 2.5 per cent to 3.5 per cent in the RBA's August Statement on Monetary Policy.
Meanwhile, the RBA said the federal government's efforts to return the national budget to surplus in 2012/13 could detract between 0.75 and 1.5 percentage points from GDP growth in the current financial year.
"The Australian government's fiscal consolidation appears to be weighing on growth over the second half of the year," it said.
The RBA also revised its forecasts for inflation higher up to mid-2013, due to a larger-than-expected spike in prices in the September quarter.
Consumer Price Index (CPI) inflation is now expected to reach 3.25 per cent by June 2013, above the RBA's target range for annual inflation of two to three per cent.
Underlying inflation, the RBA's preferred measure, is expected to reach 2.75 per cent in the same period.
The RBA also said it expected employment growth to remain subdued, with the national unemployment rate expected to rise a little above its current level of 5.4 per cent.
It also expects the participation rate, a measure of the percentage of the population either in work or looking for work to fall below its current level of 65.1 per cent.
"The current forecasts anticipate only modest employment growth in the near term, given the softer outlook for demand growth, the high exchange rate and the resulting pressure on firms to boost competitiveness," the RBA said.