Australia's growth domestic product (GDP) growth is slowing and is likely to be down to 3.7 per cent from 4 per cent by the end of 2008, according to Lehman Brothers Australia chief economist Stephen Roberts.
By the end of 2009, it is expected that growth will be down to 3.4 per cent, and fairly significant lags will drag growth lower.
Australia's terms of trade have given back to back negative returns and the second big lag follows the raising of interest rates, Roberts said.
"Our forecasts as far as interest rates are concerned, are we see the cash rates on hold here at 6.75 per cent all the way through 2008," Roberts said.
"We don't expect interest rates to come down fast. 6.75 per cent is something we should learn to get used to.
"The next interest rate ease here is something for perhaps 2009."
Robert's exchange rate forecast was for a softening in the Australian dollar, to below 80 cents and at 78 cents at the end of 2008.
By the end of 2009, he expects a further fall to 73 cents.
"Part of that is predicated on the revival of the $US," he said.
However, despite the 10 per cent predictive fall against the greenback, Roberts said he didn't think the Australian dollar would be a soft as its competitors in the commodity space such as New Zealand and Canada.
