Australia’s central bank maintained its forecast of accelerating growth in response to easy policy, even as risks around key trading partner China cast a shadow over the regional economic outlook.
The Reserve Bank of Australia (RBA) trimmed its inflation forecast for the year through June and its growth projections for next year in a quarterly monetary policy statement yesterday, but it kept most of its estimates unchanged.
“A further increase in growth in household incomes and demand is anticipated, supported by rising employment, low interest rates and lower” gasoline prices, it said.
“The outlook for China’s growth is a significant uncertainty for the outlook for the Australian economy,” the bank said.
Policy makers kept rates unchanged at a record-low 2 percent on Tuesday for a ninth month as they gauge the impact of recent financial market turbulence on global and domestic growth. However, traders are pricing in a better-than-80 percent chance the RBA will cut rates in the next six months.
Australia recorded its biggest quarter of employment growth on record at the end of last year and unemployment fell to 5.8 percent, even as the economy was on course to expand at a below-trend pace.
“It is possible that the strength in the labor market data contains information about the economy not apparent in the national accounts data,” the RBA said. “In part, employment growth appears to have reflected the relatively strong growth of output in the more labor-intensive sectors of the economy, such as household services.”
Reflecting lower global commodity prices, the central bank lowered its forecast for the terms of trade, or the ratio of export prices to import prices, by about 4 percent compared with its estimate in November last year.
Given inflation is low and the central bank expects little upturn, it reiterated that there might be “scope for easier policy, should that be appropriate to lend support to demand.”
While global central banks are struggling with disinflation or outright deflation that an open economy like Australia’s would be exposed to, one of the curiosities to date is the lack of pass through of higher import prices from a falling currency.
“Heightened competitive pressures, including from new entrants into the Australian retail market, and greater efforts by retailers to reduce their costs and improve efficiency, are continued to limit the extent to which higher import prices are evident in final retail prices for some time,” the RBA said.
That is a boon for consumers.
The central bank also said its forecast for better household consumption and income growth — reflecting higher employment and the plunge in gasoline prices — indicate the nation’s savings ratio is likely to decline less than previously expected.
South Korean prosecutors yesterday summoned Samsung Electronics Co vice chairman Jay Y. Lee for questioning in an investigation into alleged accounting fraud and a controversial 2015 merger of two Samsung affiliates, dealing another legal blow to the country’s largest corporation. While expected, the decision marked a deepening of a long-running probe into the billionaire scion and his shipbuilding-to-smartphones Samsung Group conglomerate. The company’s de facto leader was called into Seoul Central District Prosecutors Office at 8am in relation to allegations over illegal acts in succession plans, the Yonhap News Agency reported. Lee has been at the center of a years-long scandal
British no-frills airline EasyJet PLC yesterday said that it would axe up to 4,500 jobs, or almost one-third of its workforce, as the COVID-19 pandemic ravages demand and grounds global air travel. “We are planning to reduce the size of our fleet, and to optimize the network and our bases. As a result, we anticipate reducing staff numbers by up to 30 percent across the business and we will continue to remove cost and noncritical expenditure at every level,” EasyJet CEO Johan Lundgren said in a statement. The job cuts would affect up to 4,500 of the carrier’s 15,000 staff, a spokesman
BEIGE BOOK: The US Federal Reserve’s report said that while many contacts were hopeful of a pickup in overall activity, they were pessimistic on the pace of recovery Businesses across the US surveyed by the US Federal Reserve do not appear to share the optimism of US President Donald Trump’s administration about a rapid economic recovery starting this summer. The Fed on Wednesday released a report that draws on business contacts from the central bank’s 12 regions and details the economic damage last month and this month, as measures to combat the spread of the COVID-19 pandemic took hold. The report, known as the Beige Book, cited business contacts who were less sanguine about the economy’s outlook than the administration. Trump has forecast “some great numbers” in the final three
Apple Inc is to begin reopening its retail stores in Japan this week, one of its most important markets, after the stores had been shuttered for months due to COVID-19. Two locations — the stores in Fukuoka and Nagoya Sakae — are to reopen tomorrow, according to the company’s retail Web site. Reopening dates for the country’s eight other Apple stores have not yet been posted. In September last year, Apple opened its latest and largest outlet in Tokyo’s Marunouchi business district, close to the historic Tokyo Station and the Imperial Palace. Japanese Prime Minister Shinzo Abe yesterday told a nationally televised