Australia’s economy grew at a faster pace at the end of last year than in Q3, as expected. Recent natural disasters will lower GDP in this quarter but the outlook is positive. Growth should accelerate to an above-trend pace in 2011-12, with investment leading the way. Our view on the Reserve Bank of Australia’s (RBA) policymaking is unchanged. We expect the cash rate to reach 5.75% by mid-2012, from 4.75% now. In contrast, the markets expect only 25bp of tightening over the same period.
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