The Reserve Bank of Australia has lifted its GDP forecast to 0.5%, just one day after Australian Bureau of Statistics figures showed unemployment remained steady in July at 5.8%.
Previously the RBA believed GDP would fall by 1%, but has revised its view due to the relatively resilient economy.
“Overall, recent economic conditions in Australia have been stronger than expected at the time of the previous Statement,” the RBA said in its quarterly monetary policy statement.
“The bank’s central forecast is now for the economy to record modest growth of around 0.5% over 2009, with growth gradually firming through 2010.”
The RBA also said that more interest rate cuts are unlikely, due to an improvement in economic conditions in the last three months alongside higher consumer sentiment. ??”With the cash rate at an unusually low level and the global economy stabilising, movement towards a more normal setting of monetary policy could be expected at some point if further signs of a durable recovery emerge,” the RBA said.
It also noted that business investment is the main weakness in the economy, while private non-residential construction will remain weak “for some time”.??”For the time being though, the board’s judgment is that the present accommodative setting of monetary policy is appropriate given the economy’s circumstances.”
The RBA also said that inflation, while expected to trough at about 2%, will still be at a higher than anticipated level than at the time of the last statement. It predicts GDP growth of 2.25% by the end of 2010, and 3.75% during 2011.
Shares open lower after US drop
Despite the good news, the Australian share market has opened lower today after negative results in the US, where economists expect imminent unemployment data to reveal a loss of hundreds of thousands of jobs.
The benchmark S&P/ASX200 index was down 41.8 points or 0.97% to 4284.5 at 12.05 AEST. The Australian dollar also declined, moving down to US83c.
Westpac shares lost 0.6% to $22.79, while NAB shares fell by 1.4% to $25.38. ANZ lost 0.4% to $1939, while AMP gained 1.7% to $5.91.
Regional lending and insurance group Suncorp Metway has flagged a fall in net profit during the current financial year due to volatile markets. The company now expects net profit of up to $360 million, and a cash profit of $530 million.
“Cash profit is expected to be in the range of $510 million to $530 million,” the company said in a statement to the ASX. “Net profit after tax, Promina acquisition items and minority interests is expected to be in the range of $340 million to $360 million.”
“In addition, as Australia’s largest general insurer, the group has been impacted by a series of major insurance claim events.”
Commonwealth Bank of Australia chairman John Schubert will retire in February 2010, and will be replaced by former Brambles chief executive David Turner.
“The group is in a strong position – well placed to take advantage of the many opportunities which will, no doubt, arise as the economy recovers from the global financial crisis,” Schubert said in a statement.
“The selection of David Turner as the group’s new chairman was carefully undertaken by the board over a period of several years and my resignation accords with the board’s corporate governance guidelines which nominate five years as the preferred term for the chairman.”
Meanwhile, packaging group Amcor has settled a dispute in the Federal Court with Cadbury due to anti-competitive conduct accusations. The terms of agreement are confidential.
“Cadbury remains a key packaging customer of Amcor, as Amcor has also recently entered into a long-term supply arrangements with Cadbury for Cadbury’s carton and corrugated bow requirements in Australia and New Zealand,” Amcor said in a statement to the ASX.
Turnbull holds on, affirms party support
Federal Opposition Leader Malcolm Turnbull has said his party supports him after the OzCar email debacle, despite reports he will be replaced by the next election.
Speaking on the ABC’s Q&A program, he said he takes responsibility for being misled by Treasury official Godwin Grech.
“I put all the facts out in the public domain,” he said. “When that information turns out to be wrong, then we acknowledge that.”
“I have the support of my colleagues.”
Overseas, US stocks have dropped despite Labor Department figures that show unemployment claims fell 38,000 to a seasonally adjusted 550,000 for the week ending 1 August. The Dow Jones Industrial Average fell 24.71 points, or 0.27%, to 9256.26.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
