RBA forecasts better growth for 2012

Monday, 13 Aug 2012

Australian economic growth will be better than previously expected, the Reserve Bank of Australia (RBA) has announced, although Europe remains a concern.

In its statement of monetary policy, the RBA said improved data from the first six months of the year had led it to alter its gross domestic product predictions for 2012.

The organisation said growth of three and a half per cent is now possible, which is up 0.5 percentage points on its May estimates.

However, it added: "The economy is then expected to grow at around three per cent over 2013 and 2014, little changed from the May statement."

Financial markets could suffer from woes in Europe, the RBA added, with eurozone issues being described as a "significant downside risk" to economies worldwide.

"The sequence of policy responses to date, while often improving sentiment temporarily, has not been able to fix the underlying problems," it explained.

According to the central bank, it is difficult to say what will happen in China, an economy on which Australia is particularly reliant.

The comments came after the institution decided to maintain the key cash rate at 3.5 per cent last week, citing improved domestic data and recent previous cuts as reasons.