"Conditions in the business sector, as assessed in surveys, generally had remained below average, possibly in part because the exchange rate had remained high"
-the Reserve Bank of Australia
Australian leading index, which is based on 7 economic indicators, and is designed to predict the direction of the economy, fell in March, suggesting the economy is struggling to grow and additional measures by the central bank may be needed. The Conference Board Leading Economic Index for Australia increased 0.1% in March to 122.4, following a 0.3% gain in the previous month, and a 0.1% increase in January. Despite the slowdown the index has been increasing slightly in the first three months of this year, and its six-month growth has also picked up.
Earlier this month the Reserve Bank of Australia cut its benchmark interest rate to a record in order to boost businesses weakened by the currency's sustained strength, even as households responded to earlier reductions. A rate-cut decision followed the slowest core consumer price growth in 14 years in the first quarter of 2013, with business confidence also remaining weak.
"Conditions in the business sector, as assessed in surveys, generally had remained below average, possibly in part because the exchange rate had remained high," the RBA said in minutes of its May 7 meeting released today in Sydney. "Increasingly, the household sector had shown signs of responding to" lower rates.
© Dukascopy Bank SA