The Australian Economy Is Likely To Speed Up In 2012

The Australian economy is expected to accelerate this year as mining-sector investment drive growth, yet it increases the core inflation to 3%, which is between the RBA's targeted range of 2% & 4%.

The Australian economy issued the fourth quarter's figures for the producer prices index, as it retreated to 0.3% compared with the prior reading of 0.6%, also it came below forecasts of 0.4%.

Also, the annual reading was released as well, where the annual PPI reading for the fourth quarter rose to 2.9% compared with the prior reading of 2.7%, yet it came below expectations of 3.0%.

As, the nation's Gross domestic product will expand to 3.6% in 2012, compared with last year's expectations of 2%, along with the underlying inflation, which excludes the most volatile components, is estimated to reach 2.5% this year compared with the prior year's estimates of 1.8%.

The Reserve Bank of Australia (RBA) cut down the benchmark rate by a quarter percentage (25 points) on November the first, and again on December the sixth, which is the first consecutive reductions since 2009, as inflation pressures eased, which helped the policy makers to cut down the interest rate by 50 points to sustain the nation's growth, as risks to global growth increased.

Additionally, reserve-Bank Governor Glenn Stevens reduced the overnight cash rate target to 4.25 percent from 4.5 percent in December, considering Europe's turmoil and the current global turbulences in the financial markets and an increased chance of a further material slowing in global growth, which increases investor's speculations by 79% chance of a further cut via Governor Glenn Stevens by another quarter percentage point at the next meeting on February the seventh.

Lastly, Australia’s currency has dropped about 6% since it reached its highest level of $1.1081 on July 27, as the AUD at the beginning of today's trading session retreated against the U.S. dollar amid the PPI news, where the AUD/USD pair is currently trading around the level of 1.0464$, after recording its highest at 1.0492 and lowest at 1.0456.