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Australia central bank upbeat on economy, watching unemployment
[ADELAIDE] Australia's economy is successfully dealing with the aftermath of a decade-long boom in mining investment while low inflation means there is still scope for further rate cuts if needed, a top central banker said on Tuesday.
The upbeat outlook was underlined by a well-regarded survey of Australian business which showed a pick up in sales, profits employment and investment plans late last month.
Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe linked the prospects for any further easing to the labour market, implying a move might not be needed should the unemployment rate remain steady.
The central bank has kept rates at 2 per cent since last May as employment growth surprised with its strength and helped hold the jobless rate around 6 per cent.
Government data out last week showed the overall economy had also gained momentum to reach growth of 3 per cent in the final quarter of 2015, well above the RBA's own forecast.
That pick up looked to have continued this year with businesses reporting stronger activity across a range of sectors.
"While none of these indicators suggests that we are on the cusp of a return to the type of growth rates we saw before 2008, they do suggest that the economy is successfully rebalancing following the mining investment boom," said Mr Lowe.
National Australia Bank's well regarded monthly survey of more than 500 firms showed its index of business conditions rose three points to +8 last month, comfortably above the long-run average.
"The service sectors have very much stepped up and are now driving an impressive rebound in non-mining domestic demand," said NAB's chief economist Alan Oster.
Helping the economy has been a lower Australian currency, which touched a seven-year trough against the US dollar in January having fallen by a third over the preceding three years.
The Australian dollar has since bounced over five US cents to reach an eight-month top at US$0.7486 as commodity prices bounced and domestic data proved solid.
Asked about the rebound, Lowe said the RBA would welcome a"slightly lower" currency but also acknowledged how hard that was to obtain when so many other central banks were busy easing policy.
"When you look around the world at the moment, almost every central bank would like a lower currency," said Mr Lowe. "We would be in that group."