Helped by its massive natural resources, Australia has weathered the global financial crisis better than other Group of 20 economies. In 2012, its economy grew 3.1 per cent, compared with 1.6 per cent in the United States and 1.1 per cent in Canada.
Australian growth forecast cut to 2.5pc
Australia's central bank scaled back its inflation and growth forecasts yesterday, warning of a subdued outlook as the commodities-driven economy transitions away from mining.
The Reserve Bank of Australia said it expected growth of 2.5 per cent and inflation of 2.25 per cent for the year to December 31, compared with forecasts in February of up to 3 per cent for both.
"Overall, the subdued outlook over the next year or so continues to reflect the approaching peak in mining investment, ongoing fiscal consolidation, and the high level of the Australian dollar," the RBA said in a quarterly statement on monetary policy.
The bank said that mining investment "is still expected to be close to its peak" with a gradual shift towards the non-mining sectors of the economy and a greater emphasis on domestic spending.
"While there are signs that this rebalancing is beginning, there remains considerable uncertainty about how it will proceed," the central bank said, adding that economic expansion was expected to be "a bit below" long-term averages this calendar year, before returning to levels of up to 3.5 per cent next year and 4 per cent in 2015.
The RBA slashed interest rates to a record low 2.75 per cent this week in a bid to stimulate Australia's non-mining economy, citing sluggish growth and rising unemployment as well as the protracted strength of the country's dollar.
The commodities-linked currency was hovering just above parity with the US dollar at US$1.0075 in late trade. It has not dipped below US$1 since May 14 last year.
The central bank said the outlook for government spending was clouded by "considerable uncertainty" before the September 14 national elections, with a sharp fall in revenues expected to be revealed in next week's budget.
Finance Minister Penny Wong warned of a A$17 billion (HK$131.9 billion) slump in government earnings on Tuesday, due to the high dollar's impact on company profits.