Reserve Bank Accused of Overly Pessimistic Economic Growth Outlook

Australia's economic growth outlook is being criticized for being overly pessimistic by some economists.

The Reserve Bank of Australia (RBA) has been accused of having a too gloomy view on productivity, with Treasury's assumption of 1.2% annual growth over the next four decades being seen as overly ambitious.

HSBC chief economist Paul Bloxham said this assumption 'seems to us like an unrealistically optimistic one', pointing out that the RBA's own medium-term forecast is only 0.7%.

Meanwhile, Westpac's Luci Ellis argued that the RBA's forecasts might be overly gloomy, saying that the bank's assumptions 'implicitly require a repeat of the factors that dragged recent productivity outcomes down'.

The RBA also diverges from Treasury in its assumptions for workforce participation and full employment, with Dr. Ellis noting that this could lead to more inflationary pressure for any given level of demand.