No case for rate rise in June

An avalanche of key economic data out over the past week reveals an economic picture in which the Reserve Bank could do little else but leave interest rates on hold for June when it meets on Tuesday.

The GDP figures for the March quarter came in at 0.7 per cent confirming the slowdown in economic growth since last year. The result puts annual economic growth at just 1.9 per cent with the upward revision of the December quarter figures. Certainly down on what we have enjoyed in recent years but not disastrous. These modest levels will at least help ease inflationary pressures threatening to emerge in some parts of the economy.

The poor trade performance accounted for about 0.3 percentage points off GDP but higher world growth and the impact of tax cuts in the second half of the year will help underpin economic growth in coming months.

On the negative side, though, retail trade fell 0.5 per cent in April reaffirming fears over the decline in consumer spending since mid last year. Further falls in spending will be of concern given that it's been consumers' willingness to spend that has been the biggest factor in economic growth over recent years.

Borrowing for housing grew by 0.8 per cent while personal credit grew 0.7 per cent, again modest readings compared to recent years. These numbers have been consistent over the last few months and the Reserve Bank will draw heart that our borrowing binge of 2002-04 has made way for much more sustainable credit behaviour.

This all suggests an economy neither falling in a hole nor overheating and leaves the RBA able to watch and wait for now, leaving interest rates steady.