Treasurer Scott Morrison remains positive about the economic outlook even as new figures suggest the economy ended 2015 on a gloomy note.
“Our economy is growing … and we are generating more jobs for every inch of growth in this transitioning economy,” he told parliament on Tuesday.
Quarterly trade figures unexpectedly pointed to exports making no contribution to growth in the final three months of last year.
That caused some economists to scale back their expectations for Wednesday’s national accounts that are likely to show an annual GDP rate of around 2.5 per cent, well below a level normally associated with strong employment growth.
However, the Reserve Bank was content to leave the cash rate at a record low of two per cent – where it has stood since May 2015 – at its monthly board meeting but continued to leave the door ajar for a cut down the track.
“Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand,” central bank governor Glenn Stevens said in a statement.
But prominent economist Saul Eslake believes the Reserve Bank will be reluctant to use that option, keeping it in reserve if there is a real threat to the economy.
He told the Outlook conference in Canberra that although Australian house prices were undoubtedly high, there was no immediate danger of a housing bust like that suffered elsewhere in the world.
“It’s obviously a risk that people are going to continue to worry about … it reinforces my view that there is not much good to be done by having further cuts in interest rates if all that does is inflate the existing level of house prices,” he said.
Rabobank chief economist Wim Boonstra also told the Australian Bureau of Agricultural and Resource Economics and Sciences conference that interest rates alone were not enough for a sound recovery in the world economy.
There was no co-operation between central banks and they were running out of options, he warned.
His comments came as the commodity forecaster estimated world growth falling to 3.1 per cent in 2015, from 3.4 per cent in 2014 – the lowest level of growth since 2009.
The bureau predicts the Australian economy will expand by 2.5 per cent in 2015/16 and 2.8 per cent in 2016/17. “Over the medium term, Australian growth is expected to recover to around three per cent before moderating to the assumed potential growth of about 2.7 per cent a year towards 2020/21,” the bureau said.