RBA Keeps Interest Rate on Hold as China Headwinds Grow

The Abbott government’s “jobs and growth” slogan will come under further scrutiny on Wednesday with economists predicting sluggish, and possibly negative, growth when the June quarter figures are released.

The Reserve Bank of Australia left its key interest rate at a record low on Tuesday on the eve of what is expected to be a limp set of economic growth figures.

As the share market and Aussie dollar were hit by renewed uncertainty about the Chinese growth, the central bank said a cash rate of 2% was appropriate for an economy that is expected to be growing below its long term average of 3 to 3.25% “for some time yet”.

Economists expect Wednesday’s national accounts will show the economy grew at about 0.5% in the June quarter, half the pace recorded in the previous three months. That would translate to annual growth of around 2.2%.

But some experts believed that economic activity may even have shrunk in the three months to the end of June.

Figures released on Tuesday showed that the country’s trade deficit ballooned to $19bn for the second quarter compared with $13.5bn in the first three months of the year.

via The Guardian

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