As a consequence, growth remains largely reliant on private domestic demand. Business investment is expected to be an important source of growth going forward, reflecting highly favourable conditions and the competitive need to refocus, retool and retrain. Momentum in household spending remains solid.
However, in an environment of more modest growth in employment, wages and net worth, households’ dependence on debt financing remains the biggest domestic risk. As the Bank noted in its March decision, the profile for core and total CPI inflation is somewhat firmer than previously anticipated, reflecting reduced economic slack as well as higher oil prices.