Fed: Economic growth picked up: Macfarlane=3

AAP General News (Australia)
08-18-2006
Fed: Economic growth picked up: Macfarlane=3

Mr Macfarlane said it was clear the May interest rate rise, and higher petrol prices,
had not knocked around the economy too much.

"While the pick up has not been excessive, the general message from the growth in employment
and consumer spending was that the household sector is still in good shape and has not
retreated into its shell as a result in the rises of petrol prices and the May interest
rate increase.

"The fact that borrowing by the household and business sectors has accelerated over
the last six months or so confirmed this general picture."

Mr Macfarlane said the bank's recent three increases in interest rates were still working
their way through the economy.

He said he was still optimistic about the global economy, and this could then feed
inflation into the Australian economy.

A fall of commodity prices from their current very high levels would provide some relief,
he said, while the recent lifts in monetary policy could also bring down inflation.

Mr Macfarlane said there was still a chance the sharp drop in consumer sentiment may
continue to fall.

"It has fallen significantly over the last two years," he said.

"I wouldn't be anywhere as confident that it's just going to bounce back again.

"The consumer, while they haven't gone into their shell, have certainly slowed their
spending down, and they may slow it by more, we don't know."

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KEYWORD: RBA MACFARLANE 3 CANBERRA

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