Economic Growth Stronger Than Expected: RBA

Published : 30 September 2016

Whether you are buying or selling a property or a business, the economic outlook is strong, according to the RBA's Glenn Stevens, Governor: Monetary Policy Decision.

He said low interest rates and the depreciation of the Australian dollar exchange rate since early 2013 are continuing to support the rebalancing of economic activity towards non-resource sectors.

"Growth in GDP was stronger than expected in the March quarter, in large part because of a substantial rise in resource exports, which were boosted by unusually favourable weather conditions. More recent data suggest that real GDP growth was more moderate in the June quarter, as expected," he said.

"The unemployment rate has remained at around 5¾% over 2016, which is around ½ percentage point lower than a year or so ago. Following particularly strong growth late last year, employment growth has been slower this year. While this was largely expected, recent employment growth has been concentrated in part-time employment.

"Forward-looking indicators of the labour market have been mixed of late. Those indicators overall are consistent with a modest pace of employment growth in the near term and little change in the unemployment rate."

While there has been little change to the overall outlook for economic activity since Mr Steven's previous Statement, GDP growth looks set to increase to around 3-4% by 2018, which is above estimates of potential growth in the Australian economy.

"Consistent with the profile for economic activity, employment growth is expected to increase gradually and the unemployment rate is expected to fall a little. This would imply spare capacity remaining in the labour market throughout the forecast period," he said.

Household consumption growth is expected to be close to its long-run average over the next couple of years. Surveys suggest that households' perceptions of their own finances have been above average in recent months and expectations of unemployment are lower than in recent years.

"Income growth is expected to pick up gradually, but it is likely to remain a bit lower than consumption growth for a time," Mr Stevens said.

"Dwelling investment has continued to grow strongly. While building approvals have declined over the past year, they remain elevated and the pipeline of dwelling construction is at very high levels. This is expected to support dwelling investment for some time."