Amid turmoil, RBA slashes forecast
Published in the Adelaide Advertiser - August 2011
By Christopher Russell
CAUTIOUS consumers, international fears and a slower-than-expected recovery from the summer's natural disasters has led the Reserve Bank of Australia to trim back its growth forecasts.
It now expects gross domestic product to have grown by 3.25 per cent by December this year rather than the 4.25 per cent it forecast in May.
Its quarterly Statement on Monetary Policy, published yesterday, says the RBA expects resources to power ahead while other sectors struggle.
"There is a large divergence between the mining and related sectors, and the rest of the economy, with the cautious behaviour of households, the unwinding of the fiscal stimulus and the high exchange rate weighing on a number of industries," it said.
Publishing on a day of turmoil on global stock markets, the RBA said there were many areas of uncertainty - particularly household behaviour. It expects household savings rates to increase modestly from already high levels but says there also are plausible arguments for a steep increase or a dip in savings ratios.
In the wake of the share market plunge, households will be looking to secure investments in gold, cash and property.
The gold price has already doubled since the global finance crisis but Perth Mint treasurer Nigel Moffatt expects even more buying pressure.
"Gold has been a safe haven for more than 5000 years and no more so than right now," he said.
The property market may also pick up.
"When the share market falls, investors flee to hard assets such as property," Portfolio Management Services managing director Jock Bing said.
But stock market watchers believe there will be a rebound. Analyst Dale Gillham. from fund manager Wealth Within, named BHP, Rio Tinto, Newcrest Mining, Lend Lease and Incitec Pivot as his key defensive stocks.
"The time to exit our share market has passed," Mr Gillham said. "Now is the time to take advantage of the nervousness."
Investors will hope he's right.
-with Karina Barrymore
