No change on interest rates today and possibly no change for much of next year, despite another strong set of growth numbers from the September quarter’s national accounts.

The RBA justified its steady as she goes approach by pointing to the worsening outlook for international markets, despite continuing concerns about inflation. 

The Bank now thinks the rise in market rates flowing from the returning credit crunch will help drive down inflation (it has shortened the period it forecasts inflation above 3% and now expects an easing around mid next year).

The September growth figures showed a 1% rise in gross domestic product in seasonally adjusted terms from the June quarter and a 4.3% rise over the year from September 2006. That’s the strongest rate of growth in recent years.

But a worrying trend emerged in the most important statistic for our resources-driven economic performance — our terms of trade fell for the first time since 2001.

The fall was only 0.8%, cutting the improvement over the 12 months to September to 2.9%, but it is a sign that the resources boom is maturing and running out of steam. The terms of trade were steady in the June quarter, so we have now had six months of no growth.

Higher prices for coal and iron ore might change that next year but the global uncertainty is impacting oil, and metal prices which could further erode the terms of trade.

Peter Fray

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