Wednesday 20th June 2012

The economy – and rates – could slide

by Alan Thornhill

The Australian economy could be heading for a speed bump.

The Westpac-Melbourne Index, which signals the likely pace of economic activity three to nine months into the future recorded growth of just 0.2 per cent in April.

That is well below its long term trend of 2.6 per cent.

Westpac Senior Economist Matthew Hassan said: “The Leading Index is pointing to a sharp slowdown in growth over the second half of this year.

He said the “biggest drags” on the index were rising unit labour costs, home building approvals, commodity prices, overtime worked and corporate profits.

Mr Hassan said Westpac expects further easing to take the Reserve Bank’s cash rate from its current level of 3.25 per cent to a new low point of just 2.75 per cent.

The bank is forecasting another 25 point rate cut next month.

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Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.

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