Australia's RBA keeps rates on hold amid commodity selloff

Diposkan oleh silent aja 3:34 PM Post a Comment

Credit: Reuters/David Gray

A ship is loaded with containers at Sydney's Port Botany container terminal March 4, 2013.

Tuesday's data from the Australian Bureau of Statistics showed net exports added 0.8 percentage points to gross domestic product (GDP) in the third quarter, reinforcing expectations for a solid rise in growth overall.

The GDP report is due on Wednesday and analysts have been looking for a robust rise of 0.7 percent in the quarter and 3.1 percent for the year. ECONAU

Government data also showed a steep 11.4 percent jump in approvals to build new homes during October. That entirely reversed a big fall in September and erased concerns that a much-needed revival in construction was somehow in danger.

That should be a relief to the Reserve Bank of Australia (RBA) which has been counting on a stronger housing market to underpin growth.

The central bank holds its last meeting of the year on Tuesday and is thought certain to keep rates steady as the A$1.6 trillion ($1.36 trillion) economy struggles with sliding commodity prices and cooling mining investment.

So sharp has been the fall in prices for some of Australia's major exports, notably iron ore, that investors are wagering rates might have to be cut further from the current 2.5 percent.

Interbank futures <0#YIB:> imply around a 60 percent probability of an easing by August next year, even though RBA officials have shown no sign of contemplating such a move.

A decade of heavy investment has massively increased mining production and export volumes, which is what matters for the headline measure of inflation-adjusted GDP.

But tumbling commodity prices have lowered the income earned from those exports, which in turn eats into company profits, wages and tax receipts.

That weakness will likely take a heavy toll on national income and on spending in current dollars, essentially a measure of the money circulating in the economy.

The statistical divergence was clear in the country's balance of goods and services which was reported as a surplus of A$4.58 billion in volume terms, but as a deficit of A$4.38 billion when measured in current dollars.

Australia's current account as a whole was in deficit to the tune of A$12.52 billion, though that was an improvement from A$13.95 billion in the second quarter.

(Editing by Eric Meijer)