Australia expects lower economic growth durig the next year

Australian economyThe Australian Government has announced that the economic growth during the current year will be slower and the unemployment will rise. The tax revenues will fall more than previously expected. This is one of the first signs that the mining boom in the country is starting to cool down. One of the most successful economies in the recent years is beginning a delicate transition away from reliance on its commodity sector as the demand from its main trade partner – China is declining. The world’s 12th-largest economy, Australia is now expected to grow 2.5% in the fiscal year through June 2014, below the 2.75% level the government had forecast as recently as May. Growth the year after is expected to recover to 3.0%, Treasurer Chris Bowen said Friday. The new situation comes because many of the mining companies are forced to close its project while the demand from the manufacturing and the constructions sector remains weak, which puts the government in a very tricky situation. Currently the mining sector makes around 20% of the economy of the country.

The central bank has already cut the interest rate to a record low – 2,75%. The aim is to help non mining sectors to expand. Presently however the effects of this policy have been disappointing. It is expected that the central bank will further cut the rate at its meeting on 6th August.

“It’s an economy that is making a transition from growth led by mining investment to growth led by a combination of exports and other components of domestic demand that is proving to be less seamless than the government had hoped,” said Saul Eslake, Australia Economist at Bank of America Merrill Lynch.

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