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Lehman Bros cuts Australian growth forecasts

By Mike Taylor

The Reserve Bank of Australia’s two latest interest rate rises have impacted on the assessments of major investment houses, with the latest Lehman Brothers analysis actually cutting the company’s 2008 and 2009 growth forecasts for Australia.



The Lehman Brothers Weekly Economic Monitor said the company saw two main reasons why growth would slide: “First, the massive and positive terms of trade shock that has been main force driving robust Australian economic growth since early 2003 appears to be on the turn,” and second, “The lagged impact of three cash rate hikes by the RBA since June 2007 is likely to temper spending by a heavily indebted household sector through 2008”.

Importantly, the Lehman Brothers analysis said that it did not share the Reserve Bank of Australia’s analysis that Australia’s terms of trade would rise in 2008.

What is more, the Lehman Brothers analysis said it expected Australian gross domestic product growth to continue slipping in 2009 as a delayed response to weaker Asian economies.



19 February 2008