SYDNEY: Australia's central bank scaled back its inflation and growth forecasts Friday, warning of a "subdued" outlook as the commodities-driven economy transitions away from mining.
The Reserve Bank of Australia said it expected growth of 2.5 percent and inflation of 2.25 percent for the year ended December 31, compared with previous forecasts published in February of up to 3.0 percent for both.
"Overall, the subdued outlook over the next year or so continues to reflect the approaching peak in mining investment, ongoing fiscal consolidation and the high level of the Australian dollar," the RBA said in a quarterly statement on monetary policy.
The bank said mining investment "is still expected to be close to its peak" with a gradual shift towards the non-mining sectors of the economy and a greater emphasis on domestic spending.
"While there are signs that this rebalancing is beginning, there remains considerable uncertainty about how it will proceed," it said.
It said Australia's economic expansion was expected to be "a bit below" long-term averages in 2013, before returning to levels of up to 3.5 percent in 2014 and 4.0 percent in 2015.
The RBA slashed interest rates to a record low 2.75 percent this week in a bid to stimulate Australia's non-mining economy, citing sluggish growth and rising unemployment as well as the protracted strength of the dollar.
The commodities-linked currency was hovering just above parity with the greenback at US$1.0089 in morning trade. It has not dipped below US$1 since May 14 last year.
The RBA said the outlook for government spending was clouded by "considerable uncertainty" ahead of the September 14 national elections, with a sharp fall in revenues expected to be revealed in next week's budget.
Finance Minister Penny Wong warned of a Aus$17 billion (US$17.2 billion) slump in government earnings on Tuesday due to the high dollar's impact on company profits.
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