Industry Update

Feb 11 2011 / 8:45 am Was written by Atwell & Co. Comments Off

On Friday of last week the Reserve Bank (RBA) released their Quarterly Statement on Monetary Policy. In their statement, the RBA provide forecasts of their expectation for Gross Domestic Product (GDP) growth and for Inflation for each six month period between December 2010 and June 2013. The RBA is forecasting that GDP will peak at 4.25% over the year to December 2011 after recording a low of 3.25% over the year to June 2011. Clearly the RBA is expecting GDP to take a hit as a result of the Qld and Vic floods and then to bounce back quite quickly thereafter. For inflation, the RBA expects headline inflation to record a low of 2.5% for the year to June 2011 with inflation generally remaining at 3.0% on an annual basis thereafter. The RBA’s preferred inflation measures, the weighted median and trimmed mean, is expected to record a low of 2.25% in June 2011 and to sit at 3.0% by December 2012 and June 2013. With GDP strong and a tight employment market it appears as if the RBA will at some point have to lift interest rates further in order to maintain inflation within its target range of 2% to 3% annually. The interest rate futures market is currently not pricing in another 25 basis point interest rate rise until November 2011 with a further increase in March 2012.

Westpac and the Melbourne Institute released the results of their monthly Consumer Sentiment Survey results this week. The Consumer Sentiment Index was recorded at 106.6 points for February 2011. The latest result shows that the Index has increased by 1.9% after falling by -5.7% in January. The Index is currently -8.9% lower than it was at the same time last year however, with interest rates at much higher levels it is no surprise to see that the consumer outlook has fallen over the year.

Source & Author RP DATA

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