Reserve Bank of Australia Raises Growth Estimate to 0.5% traders not convinced

At its August 6th meeting, the Reserve Bank of Australia starkly changed the tone of the language it used in setting expectations for further rate changes. It said that there was a possibility for the bank to raise rates, given that the economy shows substantial signs of improvement. Rate "movement towards a more normal setting of monetary policy could be expected at some point if further signs of a durable recovery emerge," the minute said. At the previous meeting, the bank anchored expectations toward the downside, saying that "the Board's current view is that the outlook for inflation allows some scope for further easing of monetary policy, if needed." Australia's export strength has been an exception as "most countries have recorded declines in export volumes of at least 10 per cent since September." China has clearly come to the aid of the land down under, the RBA acknowledged. The "strong recovery in China, which has boosted commodity prices and demand for Australia's exports, has also been important." These revelations come less than two weeks after Prime Minister Kevin Rudd stated that the country ought not to continue relying on a "mining boom." Nonetheless the RBA's counter-optimism was reflected in this statement so much that it ultimately revised it's domestic growth estimate for 2009 up to 0.5% - far superior to the 1.0% contraction originally forecast. But it seems that the market was not too convinced as to the accuracy of these estimates.