Looking at the Australian economy, Tony Hughes, senior economist at Economy.com, expects a 1.9 percent gross domestic product (GDP) growth for 2005. Most analysts don’t expect to see a shift in monetary policy by the Reserve Bank of Australia (RBA) between now and year-end. However, heading into 2006, Hughes believes the monetary policy will ease sometime in the first half.
Recent numbers have underscored that there is little for the RBA to worry about on the inflation front for now. Released in late July, Australia’s first quarter consumer price index (CPI) report posted a lower-than-expected reading, gaining only 0.6 percent from the previous quarter and 2.5 percent from the first quarter of 2004.
“The Bank of Australia is expected to leave the cash rate at 5.5 percent between now and year-end, while the Fed could ratchet up the funds rate as high as 4.50 percent,” says Sean Callow, senior currency strategist at Westpac Institutional Bank. “It’s really closing in on Australia.”
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