The economy continues to recover but some momentum, particularly in the household sector, may have been lost in the early months of 2010, Treasury says.Following a strong bounce-back in the middle of 2009, housing activity has lost momentum in recent mon
The economy continues to recover but some momentum, particularly in the household sector, may have been lost in the early months of 2010, Treasury says.
Following a strong bounce-back in the middle of 2009, housing activity has lost momentum in recent months.
While some of the weakness may reflect uncertainty about future property tax changes, it was more likely initial euphoria resulting from historically low interest rates earlier in 2009 had somewhat faded, Treasury said in its February monthly economic indicators.
Despite the weakness, residential construction was expected to contribute strongly in coming quarters, as building consents continued to rise and activity expectations remained at historically high levels.
With employment intentions continuing to rise, employment was expected to begin to expand again in coming quarters, Treasury said.
But with more people seeking work and more firms in a position to increase work hours rather than employee numbers, wage growth was likely to stay subdued in the near term.
After retail sales rose in the December quarter, initial indicators for January suggested momentum may continue to ease in the short term, with both consumer and retailer confidence slipping.
Even though uncertainty continued to dominate the global economic environment, Australia and Asia were recovering strongly, it said.
That, along with a lower dollar and more positive outlook for manufacturing and construction, boded well for exporters.
"While we are yet to see the full pass-through of higher expectations to activity, growth is likely to continue gradually recovering, in line with a strengthening labour market and other economic indicators."
