Australia’s economy may get a boost from mining states as the drag from falling resource investment eases and higher commodity prices bring windfall cash.
Nominal demand in Western Australia and Queensland is set to improve, providing support to the national economy, Reserve Bank Assistant Governor Christopher Kent said in a speech in Sydney on Tuesday.
“That would contribute to a rise in domestic inflationary pressures and a gradual return of inflation to more normal levels,” Kent said in the address to economists. “If our forecasts are right, the terms of trade will shift from the substantial headwind of recent years to a slight tail breeze providing some support to the growth of nominal demand.”
Kent provided a state-by-state breakdown of the economy’s performance during the post-mining boom reversal of the two-speed economy to the nation’s southeast. Victoria state, rebounding along with New South Wales on low interest rates and a weaker Aussie dollar, is benefiting from population inflows as property prices in its capital are cheaper and commuting times shorter than in Sydney.
The mining capital of Perth, in contrast, is seeing falling house prices as increased supply came on line just as population flows eased.
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