Key points
- Australian economic growth was solid at 3.7% over the year to 30 June. However, the best has been seen with growth set to slow to below 3% over the year ahead. To boost growth and guard against a slump, the Reserve Bank of Australia (RBA) is likely to cut rates to 2.75% in the next six months.
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A mining sector collapse triggering near recessionary conditions, a crash in house prices and problems for banks is not our base case but cannot be ruled out. However, such a scenario would be combated by even lower interest rates and a sharp fall in the Australian dollar to $US0.80 or below.
