Australia’s economic growth weakened in the second quarter, hurt by weaker commodity prices and a stronger currency.
Gross domestic product in the April-June quarter rose 0.5 percent from the first quarter, when it expanded 1.1 percent, reported the Bureau of Statistics. Shortly after releasing the report, Reserve Bank of Australia Governor Glenn Stevens said he plans to halt further interest rate cuts. He also added that he won’t push house prices up further to arrest the spiraling unemployment rate, which rose to its highest level in 12 years in July.
Australia’s GDP grew 3.1 percent in the April-June quarter a year ago. The report highlighted the policy divergence between Australia’s central bank and the Federal Reserve, which plans to tighten policy next year.
“Stevens was as clear as he is ever likely to be that further rate cuts are not on the agenda,” Michael Blythe, a chief economist at Commonwealth Bank of Australia in Sydney, told Bloomberg News. “A new message being developed by the RBA governor is the emphasis that policy makers have done as much as they can in creating a backdrop that should support economic growth.”
The RBA reduced interest rates from late 2011 to August 2013 in order to drive up property prices and boost housing construction in order to absorb workers who were rendered jobless after the mining boom eased. Though home prices have increased and residential building is increasing, the unemployment rate shot to 6.4 percent in July, surpassing that of the U.S. for the first time since 2007.
The GDP report indicated that household expenditure grew 0.5 percent in the three months to June from the prior quarter, up 0.3 percentage point. Non-residential property construction rose 2.5 percent, while residential construction jumped 2.3 percent. Machinery and equipment fell 3.4 percent, down 0.2 percentage point.To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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