Better outlook for mining states likely to support Australia's economic growth - RBA's Kent

Reserve Bank of Australia's (RBA) Assistant Governor Christopher Kent speaking at the Australian Business Economists Conference Dinner on Tuesday said that he reasonable prospects for overall strong economic growth.

Talking about Australia's economic transition following the end of the resources boom Kent said that prospects for Australia’s mining states are improving as the drag on economic growth from falling resource investment eases and a boost in commodity prices brings windfall cash. Kent said that that such an outcome would lift nominal demand in Western Australia and Queensland and in turn boost the national economy.

Kent expects that terms of trade will shift from the substantial headwind of recent years to a slight tail breeze providing some support to the growth of nominal demand which would contribute to a rise in domestic inflationary pressures and a gradual return of inflation to more normal levels.

He said that unemployment rate, which has declined over the past year by more than expected, is likely to edge just a little lower over the next two years. That implies that there will be some spare capacity in the labour market for a time.

“There are reasonable prospects for stronger growth of nominal demand in the mining states and, by extension, for the economy overall,” Kent said.