Wednesday, 28 May 2008

More Signs of a Slowing Aussie Economy

There are increasing signs that the Australian economy is slowing. The RBA may have done enough by raising interest rates to 7.25%. However they still remain very concerned about inflation. An overblown fear in my view, particularly given the fultility of inflation targetting in an environment where much of the inflation is being imported. from the smh:

Economy headed for slowdown - survey

Australia is heading for an abrupt slowdown in economic growth, a new survey shows.

The Westpac-Melbourne Institute leading index of economic activity released on Wednesday shows the annualised growth rate was 3.3 per cent in March, below its long-term trend growth rate of 4.4 per cent.

It was also the index's lowest reading since March 2004.

"The leading index continues to point to an abrupt slowdown in economic activity," Westpac senior economist Matthew Hassan said.

The index indicates the likely pace of economic activity three to nine months into the future.

The index has more than halved since November last year when the annual growth rate was 6.9 per cent.

"In fact the index is now further below trend than at any other time in nearly five years," Mr Hassan said.

Meanwhile, the annualised growth rate of the coincident index was 3.4 per cent in March, and below its long term trend of 3.8 per cent.

Mr Hassan said both indices are consistent with Westpac's view that domestic demand has slowed and will continue to slow over the remainder 2008 and into 2009.

The bank expects domestic spending growth to fall to 2.7 per cent in 2008, from 5.7 per cent in 2007, and to 2.1 per cent in 2009.