Australian economic growth likely to expand slightly above trend in 2017, says Westpac

Australia’s economy seems to have begun this year on a strong foot. Private business surveys have reported a bolstering of business conditions, linked with a rebound in conditions of employment and with an improvement of capital expenditure. This follows a solid recovery of the Australian economy at the end of last year.

According to a Westpac research report, the real GDP growth of Australia is expected to expand to 3 percent in December 2017. This would be slightly above trend, before decelerating to 2.5 percent in December 2018 as home building activity slows down.

A lower dollar, low rates, an increase in commodity prices, upswing in public investment and a waning of the mining investment downturn are key positives. But the Australian economy continue to face concerns regarding jobs growth, wages and consumer spending. The Reserve Bank of Australia continues to keep the key rate on hold, with the focus on prudential measures around investor lending for housing. Lately, the Australian dollar has depreciated slightly, before the anticipated retreat in 2018 on shifting interest rate differentials and lower commodity prices, noted Westpac.

However, prospects for growth in 2018 seem discouraging. According to Westpac’s Bill Evans, housing construction is expected to shrink, while export growth is likely to slow down. Also, 2018 might witness lower prices for exports and no counteraction from consumer spending nor business investment.