Australias economic growth is picking up says RBA

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Australia's economic growth is expected to pick up pace this year thanks to a lower exchange rate and stronger activity in the housing and retail sectors, according to the latest forecasts from the Reserve Bank of Australia (RBA).

Investment in the mining and resources sector is forecast to peak sometime this year and a pick-up in the non-mining sectors of the economy is needed to maintain economic growth.

The depreciation of the exchange rate should provide some additional impetus to activity in the traded sectors of the economy," the RBA said.

Business conditions improved in the latter part of 2013, and leading indicators suggest that housing investment increased in the (December) quarter and will grow further over the coming months.

After its recent board meeting the RBA kept the cash rate unchanged, highlighting the improved economic growth outlook and flagged the end of the rate cutting cycle that has seen the cash rate fall to 2.5%, from 4.75% in November 2010.

On present indications, the most prudent course is likely to be a period of stability in interest rates," RBA governor Glenn Stevens said in a statement accompanying the recent decision.

In its latest forecasts the RBA revised its economic growth forecast for the year to December 2014 to between 2.25% and 3.25%, up from the two to three per cent forecast in the November Statement on Monetary policy.

The central bank also increased all its other forecasts for the coming few years by a quarter of a percentage point.

The RBA said due to the lower Australian dollar, which is expected to boost export and restrain imports, it is expected to see the economy pick up further to an above-trend pace by 2015/16.

The bank acknowledged that economic growth to the year ahead will continue to be restrained by the "substantial fall in mining investment and planned fiscal restraint" by state and federal governments.

At the same time, low interest rates are stimulating prices and turnover in the housing market which is great news for property investors...