The Reserve Bank has left its key interest rate at a record low before what is expected to be a limp set of economic growth figures.
The central bank believes a cash rate of two per cent is appropriate for an economy that is expected to be growing below its long term average of three to 3.25 per cent “for some time yet”.
“In such circumstances, monetary policy needs to be accommodative,” RBA government Glenn Stevens said in a statement after Tuesday’s monthly board meeting.
Economists expect Wednesday’s national accounts will show the economy grew at about 0.5 per cent in the June quarter, half the pace recorded in the previous three months.
Shadow treasurer Chris Bowen said Treasurer Joe Hockey was “gloating and boasting” after the last national accounts and called anyone who questioned whether growth was sustainable “a clown”.
“I’m not going to pre-empt the figures but obviously … he’ll also have to take responsibility for the figures and explain his plans for growth in the Australian economy,” Mr Bowen told reporters in Sydney.
The anticipated tepid result partly reflects exports detracting from growth in the quarter due to the bad weather in April that closed some coal ports and prevented the export of this key commodity.
Figures on Tuesday showed exports cut a larger than expected 0.6 percentage points from growth in the June quarter, although other data showed government spending in the same period was larger than forecast.
Assistant Treasurer Josh Frydenberg played down speculation that the economy could be set to shrink.
He pointed to the ASX 200 companies, of which 170 had reported to date and 61 per cent achieved better results than the previous year.
He told ABC radio a lower Australian dollar, low interest rates and energy costs were all factors contributing to good growth across the economy.
Yet the latest Essential Research online poll found 41 per cent of respondents saying the economy is heading in “the wrong direction”, compared with 35 per cent who said it was heading the right way, and over half saying they were concerned about the cost of electricity and gas.
However, a separate survey, the weekly ANZ-Roy Morgan gauge of consumer confidence, showed sentiment rising by 0.3 per cent, a third consecutive week it has held above its long-term average.
ANZ chief economist Warren Hogan said this was a surprising result given last week’s volatility in the Australian and global stock markets.