The Australian economy is expected to grow at a robust pace, around 3%. Business investment will pick up, with exports boosted as new resource sector capacity comes on stream. Public infrastructure investment will also support growth. A stronger labour market and rising household incomes will sustain private consumption. Inflation and wages will pick up gradually.
Monetary policy is appropriately supportive, with the central bank projected to start gradually tightening towards the end of 2018, when the pick-up in wages and prices gathers pace. Risks from the housing market and high household indebtedness warrant continued vigilance. The fiscal position is sound. In the event of a downturn, fiscal policy should be used to support activity and protect the incomes of the most vulnerable.
Where does Australian growth come from? What factors are impacting the economy? How does it reinvent itself away from mining reliant economy? How does it position itself to take advantage of its unique position in Asia pacific? Those are the key questions many economists try to answer over the last few years.
"GPD Growth in most of Australia's major trading partners had remained above trend" source RBA Sep 2018 minutes.
Recent growth in household consumption is expected to continue, which have recovered in the June quarter, compared to previous quarter. Retail sales volumes pointed to a solid increase in consumption of goods. Retail sales data for July had been relatively weak, although online sales had continued to grow rapidly.
Investments in infrastructure have increased across the board, notably Sydney and Melbourne. These investments are long-awaited, due to recent growth in population. Sydney's second airport is expected to add more growth in the region, which will contribute to the overall economy.
Unemployment and wage growth
Australia's labour conditions have improved in recent years. The latest data confirmed RBA's expectation at 5.3%, the lowest since 2012. However, there is a growing trend in part-time employment rate. Wage growth has improved slightly at 0.6% in June quarter, compared to previous quarter. This growth is continued to growth leading to year-end festivity season.
Financial market
Australia's domestic housing debt is somewhat causing some attentions to policy maker. Some major lenders (40% of the market share) have increase their interest rates by 15 basis points on average. There has been some changes to investor's lending and some welcome growth in owner's occupied lending. Royal commission has brought much-needed investigations into the industry, which will improve the health of the overall industry.
What does it mean for the economy overall?
Australia is in an unique position, both in terms of geographical and economical point of view. The country is in a prime position to ride the "Asian century" where many countries in the regions are buying Australian exports like mining and other resources. On the economic terms, Australia hasn't got a recession for more than 27 years (Since July 1991). See below link
https://product.datastream.com/dscharting/gateway.aspx?abcnewsembedheight=430&action=REFRESH&guid=11785415-4f80-407a-b264-4cbf50c9caf7
Australia will indeed continue to grow and prosper in near future.
Written by Dean Nguyen, Sep 2018.
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