Australian economic growth likely to rebound in H2 2019

Australian economic growth is likely to pick up in the second half of 2019, with the low point likely to have been second quarter of this year, noted ANZ in a research report. Boosts from interest rate cuts and tax cuts are expected to be a key driver for the rebound. Without this stimulus, growth might have been materially lower.

The household spending momentum is expected to be key to the outlook. According to ANZ, consumer spending is expected to rebound, but there is a high degree of uncertainty regarding the effect of the tax cuts. Business investment is expected to stay lacklustre. Public spending and exports are expected to be the main drivers of growth in the near term.

The deceleration in growth to date is already feeding through into a softer labor market. The jobless rate is expected to rise slightly from here, peaking at 5.4 percent before rebounding very gradually through 2020-21.

The risks around the outlook, both global and domestic, continue to be significant. On the international front, the main risk is that an escalation of trade tensions sees a further fall in the outlook.

“Domestically, our main concern is the consumer: the impact of the tax cuts and the ability of households to grow spending in an environment where income growth is soft and the debt burden remains high”, added ANZ.