Thursday, May 30, 2013

A new normal?

A recent report from Pimco on the outlook for Australia after the mining investment boom peak has attracted some interest: Filling the hole Australia has dug

Pimco have estimated that the neutral cash rate for the RBA has fallen from 5.5% pre-GFC to 3% and so the current 2.75% cash rate is not "meaningfully easy". This also seems to be close to the assessment of the RBA as recently posted here at Loose Change when there were screams that interest rates had been cut to crisis levels: OMFG!

Rather than crisis levels Pimco have suggested that we are converging with the rest of the developed world in a 'New Normal':
After avoiding the worst of the ravages of the global financial crisis with the aid of significant policy stimulus from China that helped boost demand for bulk commodity exports, Australia has so far escaped the clutches of the global New Normal. However, as domestic growth outside the mining sector remains subdued and Australian policy rates appear likely to converge towards their global peers’, we believe the New Normal has finally arrived down under.
There are some similar themes in a post at the new Grogonomics blog: Five myths of the Australian economy. Meanwhile Queensland Economy Watch has posted that resources related construction in Qld remains robust for now: Resources sector investment hasn't peaked yet in Queensland.

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