In August, the RBA flagged gross domestic product growth of 3.5% for 2012 and said it expected that to remain unchanged. But GDP growth for the year to June 30, 2013, is now forecast to be a little below 2.75%, compared to the previous estimate of 3%.

GDP growth is then forecast to gradually increase to just under 3% over 2014.

“Most of this revision to the outlook is accounted for by a change in the profile for mining investment, which is now forecast to peak a little earlier and at a lower level than had earlier been expected (around 8% of GDP rather than around 9%),” the RBA said today.

“This change reflects the reappraisal of spending plans in the coal and iron ore sectors as well as a reassessment of the profile for spending on some large and complex LNG projects.

“Exports are still forecast to grow substantially over the forecast period, given the increase in capacity resulting from the large pipeline of resource investment projects.”

The RBA said mining investment continued to grow, but would be below the 55% growth experienced in 2011/12.

“Investment plans of iron ore and coal miners remain dependent upon the prices of bulk commodities, which will in turn depend on the strength and nature of growth in China,” the central bank said.

It acknowledged that iron ore prices had recovered from lows of less than $US90 a tonne in August, but said the current price of around $120/t was 20% below prices in April.

“Also, the exact timing of spending on committed investment projects in the resource sector is inevitably uncertain given their size and complexity,” it said.

“The current level of the exchange rate could also have a more contractionary effect on output than anticipated.”

The RBA maintains that mining investment growth will peak next year, though it still says it may be earlier and at a lower level than initially expected.