The Reserve Bank of Australia has said the outlook for the global economy continues to improve due to more stability in the European region.
The statements are contained in the RBA’s minutes from its March board meeting, when it kept rates on hold at 4.25%.
“Major downside risks were seen to remain, but the probability of a very bad outcome in the near future had receded a little further,” the RBA said in a statement.
“The clearest downside risk to the outlook for Australia remained a sudden worsening in the situation in Europe and its flow-on effects to the rest of the world through trade, financial and confidence channels.”
Domestically, the RBA said the economy is still undergoing a structural shift due to the dollar, although noted it remains safe due to higher commodity prices.
“A key question was whether the necessary adjustment was occurring at an overall pace of growth that kept the economy close to trend and inflation close to target.”
“In this regard, most information thus far had indicated that weakness in parts of the economy – including manufacturing, building construction and parts of the retail sector – was being approximately balanced by the strength in the mining sector and some services industries.”
It also said the inflation outlook would allow “ample scope to ease policy” if the European situation worsens.
Prime minister Julia Gillard has defended the passage of the resources tax through parliament.
“Put simply, it meant we determined to stand for the benefits to the many rather than the privileged few,” she said this morning. “The proceeds will go to where they can make the greatest contribution to jobs and economic growth.”
However, the Government continues to come under fire from the Opposition, which refuses to back the company tax cuts.
The Australian sharemarket has opened flat this morning after a similar lead from offshore markets, although the US Nasdaq has reached a 12-year high.
The benchmark S&P/ASX200 index was down 9.1 points or 0.2% to 4281.7 at 12.10 AEST, while the Australian dollar was at $US1.05c.
The Dow Jones Industrial Average rose just 6.5 points to 13,239.1.
Australia’s second-largest telecommunications group, Singapore Telecommunications, is reportedly set to announce job cuts in Australia.
According to reports, the job cuts could be hefty as the company rejigs its local Optus arm.
SingTel said earlier this month that it will undertake a corporate restructure dividing the company into operational lines, rather than geographical lines.
The Bank of Greece expects the country’s gross domestic product to shrink by 4.5% in 2012, according to an annual report.
“The recession is expected to continue in 2012 and, according to temporary estimates, the average annual contraction in gross domestic product will be in the order of 4.5%,” it said.
In 2011, the Greek economy shrunk by 6.9%.
“During 2013 it is estimated that the economic recovery can begin.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
