OECD: RBA Should Keep Rates Low

Australia’s central bank should keep interest rates low as a high currency and fragile confidence inhibit growth needed to compensate for a mining slowdown, the Organization for Economic Cooperation and Development said.

Gross domestic product growth will slow to 2.6 percent in 2013, down from 3 percent projected in November, the OECD said in a report released in Paris yesterday. With the economy slowing, the government’s “gradual approach” to reducing the public deficit is welcome, it said.

“The surge in mining investment, which is likely to peak in 2013, is gradually losing its stimulatory effect on activity, while new drivers of growth are taking time to emerge,” it said. “Signs of an upturn in the non-mining sector, which the easing of monetary conditions aims to stimulate, remain timid because of the persistently high exchange rate, which is weighing on companies’ confidence and their investment.”

Bloomberg

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