The Reserve Bank of Australia has said in its quarterly monetary policy statement that unemployment will continue to rise, but signs of economic recovery will occur by the end of the year.
“While near-term outcomes are likely to be weak, there are reasonable grounds to expect that a recovery will begin by the end of the year, provided global conditions continue to stabilise,” it said.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
“The recovery, however, is likely to be gradual at first, largely reflecting developments abroad, where growth is forecast to be below trend for some time.”
The RBA said it predicts GDP to contract by 1.25% in the June quarter, and by 1% over the 2009 calendar year. It then predicts 0.5% growth in the June quarter of 2010, with 2% growth over the year.
But the RBA board also said more rate cuts can be expected for the rest of the year, but they will be less frequent, and their sizes will be determined by monitoring of “economic and financial developments”.
The Australian sharemarket has opened lower today after negative leads from Wall Street overnight, and has failed to gain much ground despite higher commodity prices.
The benchmark S&P/ASX200 index was down 23.8 points or 0.6% to 3914.9 at noon AEST. The Australian dollar also opened higher to US75 cents.
NAB shares gained 2.2% to $22.60, as Westpac also rose 0.4% to $20.40. Wesfarmers fell 2% to $22.88 as AMP lost 1.7% to $5.17.
The Government’s Rudd Bank legislation, which details a proposed $30 billion Australian Business Investment Partnership, is now likely to be blocked in the Senate.
The legislation is designed to help protect the commercial property sector, but Independent senator Nick Xenophon asked why voters should be held liable to the large risks in the program.
“In the light of the concerns that have been raised and the lack of substantive information that has been provided in relation to these concerns, it is my recommendation that the bill should not be supported in its current form,” he said.
In the US, Wall Street fell on tech stocks despite news from the US Government’s “stress tests” that major banks are performing better than expected. The Dow Jones Industrial Average fell 102.43 points or 1.2% to 8409.85.
Troubled automaker General Motors announced a revenue drop of nearly 50% to $US22.4 billion in the first quarter, saying that cost-cutting has been negated by overwhelming drops in sales.
The company, which has received $US15.4 billion in loans from the Government, has only four weeks to restructure itself to avoid bankruptcy.