Australia’s central bank warned of continued global volatility and slowing Asian growth yesterday, saying recent market turbulence related to Europe’s debt fears had muddied the outlook.
The Reserve Bank of Australia (RBA) said bullish demand for coal and iron ore, the country’s two largest exports, had returned the nation’s terms of trade to historic heights, leaving it in a solid position of growth.
Globally, however, the bank warned that “uncertainty about the outlook remains elevated,” with high volatility persisting on world markets and the recovery patchy from the downturn.
“There is a possibility of a renewal of concerns about the financial position of European banks and governments, although the likelihood of this appears to have fallen somewhat over the past month or so,” the RBA said in its quarterly statement on monetary policy.
It noted that galloping Asian growth, including double-digit performances in China and India, appeared to be easing to a more “sustainable” pace, a welcome development for inflationary pressures.
“There is some risk that the recent policy measures by the Chinese authorities [could] result in a larger than intended slowing in growth,” the RBA said. “A material slowdown in steel-making and the construction sector could lead to a significant fall in commodity prices and potentially a delay in investment by resources companies in Australia.”
However, the bank said the upside and downside risks appeared “evenly balanced” and Australia was likely to continue performing strongly on the basis of continued demand from Asia for its resources, particularly liquefied natural gas and iron ore.
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