Banks raise projections for growth

Thursday 24 June 2004

Growth in the March quarter is shaping up as a "stunner", with market expectations of about 1.6 per cent expansion - just over 4 per cent for the year, according to National Bank.

By The Landlord

That may mean either one or two more interest rate rises by the Reserve Bank to dampen down the economy and rein in inflation, National Bank said.

Official gdp figures for the March quarter are due out on Friday.

A 25 basis point rate rise to 6 per cent on the official cash rate looks like a "done deal", National Bank said, but pushing interest rates beyond that carried economic risks.

The direct impact of another 25 points up in September would be small, but it could damage confidence, so the indirect effect could be bigger.


Westpac Bank economists said a March quarter result above 1.5 per cent was likely to keep the Reserve Bank "hawkish" at its next announcement on July 29. Westpac tipped 1.5 per cent growth for the three months, though forecasts range up to 2.3 per cent.

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