Aust. indications of economic slowdown

Press, 21 August 1989, Page 14

Aust. indications of economic slowdown

NZPA-AAP Sydney Economic indicators available last month tended to support the view that Australian growth in demand was slowing, the Reserve Bank of Australia said in its August bulletin.

But it said the slowdown was occurring “only very gradually,” in spite of market expectations last month that interest rates might have peaked which resulted in generally buoyant market sentiment and declining yields. “The bank’s operations in domestic money markets were directed at resisting this tendency and avoiding any broader easing offinancial condi-

tions,” the bank said. As a result, interest rates on overnight and call funds were kept a little higher on average last month, about 18 per cent, than in June when they averaged 17.8%, it said. The RBA said indicators available in July supporting a slowdown showed employment was steady, a further weakening in consumer sentiment, slightly lower imports, sharp falls in housing approvals, weaker industrial and commercial property markets, and steady credit growth.

This is the second consecutive month the RBA has conceded there are

early signs of an economic slowdown.

The bank reported for the first time in the July bulletin that indicators were “mixed” after it said the previous month that private demand was still “very strong” and signs of a slowdown were still “inconclusive.” The bank also said in its annual report that “higher interest rates gradually seem to be having an impact on all categories of spending.” “However, the general buoyancy of the economy has been such that rates may need to remain high for quite some time to achieve the desired effect,” it warned.