SYDNEY, Dec 7 (BSS/AFP): Pressure is building on Australia's central bank to cut interest rates from their record lows as growth in the resources-driven economy, already faltering on the back of China's slowdown, takes a further hit, analysts say.
The Reserve Bank of Australia (RBA) has repeatedly said it will continue to maintain a "period of stability in interest rates", but softening GDP growth figures last week sparked a flurry of economists forecasting further monetary policy easing.
That would take the cash rate below 2.5 per cent, where it has been for 16 months.
"The GDP read... is creating a very dark shadow over the state of the Australian economy with income growth now in recession," IG markets strategist Evan Lucas said.
The data showed the economy expanded by just 0.3 per cent in the third-quarter, far below consensus estimates of 0.7 per cent, to take the annual growth rate to a below-trend 2.7 per cent.
"The pressure on growth in 2015 is ratcheting up as key commodities remain in bear markets and if housing cools, this will only accelerate," added Lucas.
The slowdown in China, Australia's largest trading partner, is already weighing on the resources sector and hurting the wider economy.
Continuing fears about the health of the world's second-largest economy, which helped fuel Australia's unprecedented mining investment boom, has been reflected in the local dollar's high sensitivity to fluctuating Chinese data.
Just last week, the exchange rate slumped to a fresh four-year low after weak manufacturing figures raised concerns about China's growth outlook.
The new forecasts are in part driven by a plunge in commodity prices and the lack of a similar decline in the exchange rate to soften the blow.
Lower prices, particularly for Australia's biggest export iron ore, were also eroding the national income, Treasurer Joe Hockey said.
Rate cut calls grow as Australian economy falters
FE Team | Published: December 08, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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