- Dariusz Kowalczyk, Credit Agricole CIB economist
Australia's conservative party said it projects the nation's deficit to expand and stressed that falling commodity prices and political opposition to proposed austerity measures impacted severely on what a few years ago was one of the world's leading economies. The Australian economy is suffering from plunging prices for minerals such as iron ore, Australia's biggest export commodity, which declined 50% this year. The Mid-Year Economic and Fiscal Outlook showed the government expects the budget deficit for the 2014-2015 fiscal year to grow to A$40.4 billion compared with A$29.8 billion forecasted in May. Despite the revision to the deficit forecast, the government highlighted that Australia's economy would continue to be bolstered by historically low interest rates, lower energy prices, and a weaker Australian Dollar. Australia's economic growth rate is estimated to remain unchanged at 2.5% in the current fiscal year, and 3% next fiscal year. Nevertheless, the pace of growth would not be fast enough to ensure decline in the jobless rate. In contrast, unemployment rate is seen rising to 6.5% from the current 6.3%, the highest level in 12 years. Inflation estimates were slightly higher than in May, at 2.5% against 2.25% previously.
The Australian Dollar lost 0.35% against the US namesake at $0.8210 following the release.
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