BIGCAPITAL's Blog

December 2, 2010

Australia commodity index hits record high in Nov – RBA

Filed under: Uncategorized — bigcapital @ 8:31 am
Tags: , , , , , , ,

Australia commodity index hits record high in Nov – RBA

 SYDNEY, Dec 1 (Reuters) – The Reserve Bank of Australia’s (RBA) index of commodity prices rose 0.9 percent in November, from October, to reach a fresh record high in a favourable omen for export earnings.

 The index was up 44 percent in special drawing right (SDR) terms, compared to November last year. The index reading of 121.3 surpassed the August peak of 121.1.

 In Australian dollar terms the index fell by 0.5 percent in November, but was up 31 percent for the year. The index also hit a record high in U.S. dollar terms, to be up 41 percent on November last year.

 Much of the rise in the past year reflected huge price increases for iron ore and coal, Australia’s two biggest export earners. That has boosted Australia’s terms of trade, lifting profits, investment, employment and tax receipts.

– Thomson Reuters –

November 19, 2010

More rate rises on the cards, says OECD

More rate rises on the cards, says OECD

* Australia’s recovery ‘will need further rate rises’
* ‘Mining boom is fuelling economic recovery’
* OECD report forecasts economic growth

AUSTRALIA’S strong recovery from the global economic downturn, fuelled by the mining boom, means the Reserve Bank of Australia (RBA) will have to continue to raise its official cash rate, the Organisation for Economic Cooperation and Development (OECD) says.

The OECD also said the global recovery has become more hesitant, but low interest rates in many countries suggest this “soft patch” is unlikely to persist for too long.

In its semi-annual Economic Outlook report, released overnight, the OECD said Australia’s projected growth was likely to require a further tightening of monetary conditions to ensure that a non-inflationary recovery remained on track.

The OECD is forecasting Australian economic growth at 3.6 per cent in 2011 and 4.0 per cent in 2012, after 3.3 per cent in 2010.

“OECD projections include further tightening of monetary policy to moderate demand pressures and rein in the level of inflation, which is relatively high at the beginning of the cycle,” the Paris-based institution said

The RBA’s increase in the cash rate this month to 4.75 per cent was the seventh rise since October 2009.

The OECD expects inflation to remain near the top of end the RBA’s two to three per cent target band – 2.8 per cent in 2011 and 2.9 per cent in 2012.

More broadly among the 33 OECD countries, growth is forecast to expand by 2.3 per cent next year and 2.8 per cent in 2012, with inflation at a subdued 1.5 per cent and 1.4 per cent, respectively.

“The global recovery is continuing to recover, but progress has become more hesitant,” the think tank said.

“With monetary policies remaining accommodative even as fiscal consolidation becomes widespread, the present soft patch in output growth is not projected to persist for long.”

Australia’s unemployment rate is expected to fall below five per cent after mid-2011 and to 4.7 per cent in 2012, compared with 5.4 per cent as of October this year.

This is well below the expected OECD average of 8.1 per cent next year and 7.5 per cent the following year

The OECD said increased business investment should be the main engine room of Australian economic growth.

“The strength of demand from major Asian countries and the terms of trade will favour the mining sector, whose expansion should have a knock-on effect on the rest of the economy,” the OECD said.

“These developments will probably compensate for weaker (government) demand and stimulate job creation, which should support household incomes and consumption.”

The OECD said this positive outlook, associated with the development of China, could boost confidence and produce even stronger than expected growth in domestic demand.

“However, this scenario might also be adversely affected by renewed financial turbulence in the OECD area or by an unexpected slowdown in the Chinese economy,” it said.

As in a more in-depth analysis of Australia by the OECD released last Sunday, the latest report urged reforms in the housing and infrastructure sectors to reduce bottlenecks that the mining boom was likely to exacerbate

SOURCE: http://www.news.com.au/business/

Blog at WordPress.com.