FED: RBA Macfarlnae says expects GDP growth of 3.5 pct 2003 =2

AAP General News (Australia)
12-08-2003
FED: RBA Macfarlnae says expects GDP growth of 3.5 pct 2003 =2

Mr Macfarlane said the GDP forecast could be even higher if the world economy continued
to surprise on the strong side, like it had done in the past few months.

He said the RBA expected inflation in Australia to be lower at 2.25 per cent over the
calendar year 2003, compared with the 2.5 per cent previously forecast.

That would be largely due to a higher exchange rate of the Australian dollar, he said.

"Over the course of 2004, we expect the CPI to increase by 2.0 per cent, but in mid-2004
it could well be below that because the maximum effect of the higher Australian dollar
could be being felt then," Mr Macfarlane said.

"As we stated in our quarterly statement, this expectation implies that the profile
of inflation will exhibit a U-shape - falling from its present 2.5 per cent to below 2.0
per cent in mid-2004, but then rising back to 2.0 per cent by end 2004, 2.5 per cent by
mid-2005," he said.

There would be continued upward pressure on inflation after that, he said.

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KEYWORD: RBA FORECAST 2 SYDNEY

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