Australia’s economy in Q3 expanded for the seventh consecutive quarter, albeit at a slow pace. The outlook is upbeat. GDP growth should accelerate soon to an above-trend pace, with investment leading the way. Our view on the Reserve Bank (RBA) is unchanged. We forecast that the cash rate will rise to 5.75% by end-2011 from 4.75% now, although the next move will likely come in February rather than next week. The markets still expect only a 25bp tightening over the next 12 months.
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