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Australia leaves rates on hold again
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Australia's central bank has left its benchmark interest rate unchanged Wednesday at 4.75 percent, amid an uncertain global economic outlook and signs of weaker growth domestically. The decision by the Reserve Bank of Australia was widely expected. It has now left rates on hold for eight months. The last adjustment was in June 2002, when the RBA lifted rates by 0.25 percentage points. The impact of a long-running drought, a slowdown in business activity and fresh data on Tuesday showing Australian consumer spending slipped in December are among factors pointing to a loss of economic momentum in Australia. Macquarie Bank global economist Richard Gibbs told CNN on Wednesday morning that there was a sense that the pendulum was swinging towards weaker growth. He said that the 2002 boom in housing and construction had insulated Australia from the worst of the global downturn. 'Negative currents'
But with housing being wound back, the Australian economy was becoming more exposed to "negative currents" from offshore, he told CNN. Gibbs said it was remarkable that the Australian economy had remained strong for so long. "Some of the gloss is now being taken off that," he said. A survey by the National Australia Bank released on Tuesday showed a significant easing of business conditions and confidence, with NAB chief economist Alan Oster saying the bank was keeping its 2003 growth forecast at 2.75 percent. Oster also said the RBA was likely to leave rates on hold until September. The NAB view is broadly in line with that of the Federal government. In a budget update at the end of November, Australian Treasurer Peter Costello said he expected growth in the year to June to be about 3.0 percent, down from a May 2002 forecast of 3.75 percent. (Full story) Most of that decline is attributable to the impact of the drought on Australian farm output. The national commodities forecaster ABARE said in December it expected the drought would trim growth in 2002-03 by 0.75 percentage points. Other forecasters have estimated the drought's negative impact at between 0.5 and 0.7 percentage points. (Full story) The Australian dollar is trading higher Wednesday at 59.09 U.S. cents, a reflection more of U.S. dollar weakness than any underlying strength in the Australian currency. The stockmarket is trading lower, following Wall Street's overnight dip. The benchmark S&P/ASX200 is off 0.83 percent to 2922.3 in late morning trade, with market heavyweight News Corp down almost 2.5 percent.
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