The Australian economy will shrink this year, according to the latest Reserve Bank revision, released today. Gross domestic product will shrink by 1.25 percent by the end of the June quarter, and contract a further one percent by the end of the December quarter.
Previous forecasts predicted growth at 0.25 percent for June and 0.5 percent growth for December.
The bank stated: “The economy is forecast to begin to grow from late 2009, although the recovery is expected to be gradual, partly reflecting the slow recovery in global demand.”
Inflation would decline to within the RBA’s 2-3 percent target band by the end of June, falling from 4.7 percent in September 2008.
The RBA believed unemployment rate would rise, despite last month’s figures showing it had dropped slightly, and that this would affect consumption: “Consumption spending has been supported in the first half of 2009 by the government payments to households, but is forecast to soften as the labour market deteriorates.”
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