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The growth rate of leading indicators in Australia are disappointing since last five month as the growth rate mired below trend. This indicates a weaker momentum in Australian economy in first half of 2016.
Australian government revised down its real GDP growth forecast to 2.5% in 2015/16 and 2.75% in 2016/17. Reserve Bank of Australia, in contrast, estimates 2.25% growth for 2015/16 and 2.5%-3.5% in 2016/17.
RBA is satisfied with decent job growth but concern about impact of volatile commodity prices. The recent Fed's rate hike decission and weaker oil prices will change the global economic senario in near future. A significant change in growth and inflation outlook in Australia is foreseen.
"We do not expect to see the Reserve Bank needing to raise Australia's overnight rate until the second half of 2017, by which time we expect the Federal funds rate to be around 2.0% - in line with the current RBA overnight rate. The pace of Australia's adjustment to normalcy will therefore be slower than the US", states Westpac in a research note.
