Australian economy likely to expand 2.75 pct in 2018-2019 - Scotiabank

The Australian economy is performing quite well, mainly due to domestic demand. The nation’s fixed investment gains are stimulated by public infrastructure projects while business sentiment continues to be strong, leading to solid gains in non-mining business investment. Such solid momentum would be countered the effect from weaker residential investment growth that reflects the ongoing easing in the housing market.

The outlook for the Australian consumer is two-fold: solid recent employment gains are underpinning sentiment yet still-weak wage gains and high household debt levels would restrict spending growth. Australian labor market conditions continue to tighten gradually. After strong employment gains in 2017, this year began on a slightly softer note. Regardless, full-time job gains over the June 2017-May 2018 period have averaged 15,000 jobs per month. Job advertisements and surveys on firms’ hiring intentions indicate to further above-average employment gains in the months ahead, which should feed modest wage pressures in the economy.

The outlook for the external side of the economy is shaped by developments in China and in commodity markets, noted Scotiabank in a research report.

“Despite higher export volumes, net exports will likely not provide a notable contribution to Australia’s real GDP growth over the coming quarters. This reflects our expectation for lower prices of iron ore and coal together with slower growth in commodities demand in China”, stated Scotiabank in a research report.

The Australian economy began this year with solid momentum. In the first quarter, real economy expanded 3.1 percent year-on-year after a 2.4 percent rise in the final three months of 2017.

“We estimate that the economy will expand by 2⅔ percent y/y in 2018‒19, virtually in line with the country’s potential growth”, added Scotiabank.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was neutral at -36.1992, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 89.5013. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex