Australia's economic growth slowing

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SYDNEY, Aug 11 (AFP): Australia's central bank today said domestic demand was slowing significantly, leading it to cut its economic growth forecasts for the year and increasing the prospect of a fall in interest rates.

In a quarterly statement on monetary policy, the Reserve Bank of Australia (RBA) said it expected the economy to grow at 2.0 per cent in the year ended December 2008, down from its previous forecast of 2.25 per cent.

"The evidence to date is that a significant moderation in demand is now occurring, and it is looking more likely that demand will remain subdued, and economic growth will be fairly slow, in the period ahead," it said.

The bank said the slowdown would cool inflationary pressures over time, increasing the possibility of a domestic interest rate cut for the first time since 2001.

But it said it expected inflation to remain high in the short term and gave no indication of when it might lower rates from their current 12-year-high of 7.25 per cent.

The RBA said underlying inflation, its preferred measure, was expected to be at 4.5 per cent by the end of 2008, up from the previous estimate of 4.0 per cent.