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Australia’s central bank holds fire as economy on rebound
Sun reflects off the front door sign of the Reserve Bank of Australia building in Sydney in this July 5, 2011 file photo. REUTERS/Tim Wimborne/Files

Australia’s central bank holds fire as economy on rebound

SYDNEY: Australia’s economy likely rebounded sharply last quarter as exports and public spending proved surprisingly upbeat, an outcome that would cheer the country’s central bank which left interest rates at record lows on Tuesday. The Reserve Bank of Australia (RBA) has kept rates at 1.50 percent since last easing in August 2016 as it bets on a pick up in economic growth this year and next. The flow of data is favouring the bank’s optimism. Figures out Tuesday showed Australia managed to export more goods last quarter even as falling commodity prices widened the country’s current account deficit. Government spending also ran faster-than-expected in the June quarter as states splashed out on infrastructure, tilting the risks to the upside for growth. “Exports came in on the higher side, and government spending was also very strong in the quarter,” said Su-Lin Ong, chief economist at RBC Capital Markets. “The risk to GDP growth is now on the upside. We will get an upward revision to where everyone is on GDP.” Ong nudged up her forecast for growth in gross domestic product (GDP) to 0.9 percent, from an initial 0.7 percent. Analysts at CBA also predicted growth of 0.9 percent, while Westpac tipped a 1.0 percent increase. That would be a marked improvement on the first quarter’s pedestrian 0.3 percent pace, and faster than what the United States managed. Growth for the year was seen edging up to around 2 percent.

The RBA is confident economic activity will reach around 3 percent in coming months. “The recent data have been consistent with the Bank’s expectation that growth in the Australian economy will gradually pick up over the coming year,” RBA Governor Philip Lowe said in a statement following the bank’s monthly meeting. “The outlook for non-mining investment has improved recently and reported business conditions are at a high level.” Most analysts polled by Reuters expect no change until late 2018 as the RBA remains worried about the outlook for consumer spending, which account for around 57 percent of GDP.