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Australians need to save more for the economy to avoid a more rapid run-up in inflation, triggered by nation’s rising terms of trade, the Reserve Bank said today.

“In putting together the Reserve Bank’s forecasts it has been assumed that more of this boost to income is saved than was the case in the earlier boom in the terms of trade,” RBA assistant governor Phillip Lowe.

“This reflects two factors. The first is the different position of the federal budget and the second is the more cautious approach to spending currently being displayed by the household sector.”

The federal budget, handed down this week, contained no major increases in public spending and is expected the return to a surplus by 2012-13.

In that time, the RBA forecasts Chinese steel production will continue to drive demand for Australian iron ore and coal strong, boosting the nation’s terms of trade.

Terms of trade are the prices of a nation’s exports relative to its imports.

“If this lift in saving does not occur, then demand in the economy could well be stronger than forecast, and this would put additional pressure on capacity,” he said.

A lack of spare capacity in the economy has pushed the year-to-March inflation figure to 2.9 per cent from 2.5 per cent in the year to December, which surprised the RBA, Mr Lowe said.

“Disinflationary forces in the economy are not quite as strong as previously expected, largely because the economy has performed better than previously expected,” Mr Lowe said, in the speech delivered to Colonial First State Investment Forum in Sydney.

The RBA expects inflation to fall only to 2.75 per cent later this year, less than originally anticipated after the release of the March data.

Retail sales have remained lacklustre since the middle of last year, after the end of the government’s cash stimulus grants to households during the financial crisis. Six interest rate rises since October have also cut into demand at retailers, with a number of businesses including Fantastic Furniture, Clive Peeters and Woolworth’s flagging weaker sales ahead.

The RBA lifted interest rates to 4.5 per cent his month, creating more headwinds for shoppers. The latest rate rise added another $46 to the average monthly repayment cost on a $300,000, 25-year mortgage.

Investors currently foresee no chance of an interest rate rise in June, but predict the official cash rate will be at 5 per cent within a year, according to Credit Suisse data.

The central bank predicts 3.25 per cent economic growth this year accelerating to 3.75-4 per cent growth in the next couple of years, amid rising prices for commodities exports.

Source  :  www.watoday.com.au

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AUSTRALIA is still doing better than other major economies despite a jump in jobless figures, Prime Minister Kevin Rudd says.  kevin-rudd

The unemployment rate has risen to 5.7 per cent, after the total number of people in work fell by 1700, official May jobs data showed today.

 “Today we have seen an increase in unemployment to 5.7 per cent, returning to where it was in March this year, although employment remained fairly steady falling by 1700,” he told delegates at an Australian Industry Group lunch in Sydney.

He said the unemployment figures were indicative of how the financial crisis was affecting Australia.

“The global recession is continuing to have a direct impact on the Australian economy and Australian jobs,” Mr Rudd said.

“No one likes to see unemployment rise because of the global recession … (but) Australia’s unemployment rate remains lower than all other major advanced economies except Japan.”

He said the figures would have been far worse had it not been for the government’s stimulus packages.

“`Without our nation building plans, over 200,000 more Australians would be out of work,” he said.

Source www.news.com.au

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A PERTH university student is more than $13 million richer after she presented her winning ticket this week, ten months after her numbers came up.

The Perth Student received the ticket as a gift from her father, purchased  from Beechboro Newsagency in a $50 million OZ Lotto jackpot draw on July 22, 2008.

The winning ticket was a Systems 8 Slikpik costing $8.70.

At first glance, the woman thought she had won just over $13,000 but was later informed that it was actually $13,185,273.                   dollars

“I checked the commas and decimal places and then realised,” she said.

The prize remained unclaimed for 10 months.

The woman said she only decided to check a bundle of tickets because she was worried about her family’s finances.

She was unaware of the 12-month expiry on Lotto tickets in WA.

“Something made me think to check the tickets and I thought that if I win something, then I could help Mum and Dad out,” she said.

“I always remember Mum telling me that if I won Lotto, not to start jumping up and down in the shopping centre.”

She is yet to decide what to do with the unexpected windfall.

“The people close to me will be looked after and I might give some to research or a charity of some kind. It’s nice to have this much to fulfil my dreams and the dreams of the people around me,” she said.

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