The case for the RBA to reduce the cash rate in October has strengthened as the mining boom distorts a real slowdown in the national economy.
The Westpac-Melbourne Institute Leading Index, released yesterday, showed that the likely pace of economic activity declined to 3.7 per cent in July from an upwardly revised four per cent in June.
Without the boost from the mining sector, growth in the economy would actually sit around two per cent, and the outlook would be “decidedly bleaker”, Westpac Chief economist Bill Evans said.
Mr Evans said this highlighted the contrasting state of the economy where consumption was weak but investment strong. Add to this events in financial markets this week, and Mr Evans said there was still a strong case for the RBA to deliver a further 0.25 per cent rate cut in October.
Published: 18-09-08
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