Rate increase unlikely on back of GDP contraction
The Reserve Bank of Australia is unlikely to announce an interest rate increase at its June meeting this week, according to a report in The Financial Review.
"The Reserve Bank of Australia may keep interest rates on hold for a fifth straight meeting tomorrow after the economy suffered its worst contraction in 20 years in the March quarter,” wrote The Financial Review.
The spate of natural disasters earlier this year has lead to economic contraction and has caused a worsening of the Current Account Deficient as exports suffer from damaged capacity and the strengthening Australian Dollar continues to promote a strong import sector.
The Australian Bureau of Statistics found in its Australian National Accounts: National Income, Expenditure and Product report ‘In seasonally adjusted chain volume terms, the net goods and services deficit rose $7,781m to $9,089m in the March quarter 2011. This is expected to detract 2.4% from growth in the March quarter 2011 volume measure of Gross Domestic Product.’
The ABS found that export values from Queensland have dropped $73.8 billion in the December quarter to $71.8 billion in the March quarter after extensive damage from cyclone Yasi and the subsequent flooding.
The full ABS report can be found here