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Global economic growth likely to maintain recent pace, support Australian economy: St George Economics

The Australian economy has enjoyed 25-1/2 years of economic growth without a recession. It is an impressive achievement, with Australia having overtaken the Netherlands’ previous record for the longest stretch of economic growth. Nonetheless, the recent pace of economic growth has been lacklustre and the economy faces headwinds in the year ahead.  I

Increased production capacity for Australia’s key commodity exports has boosted export volumes in recent years. Australia’s trade position and incomes have benefited from strong commodity prices over the past year. High commodity prices were widely viewed as unsustainable and have now come off these highs.

Also, demographics play a key role in the longer term prospects for an economy. Despite economic growth travelling at a sub-par pace in recent years, the outlook for Australian economic growth is relatively positive, when taking into account demographic factors. According to the World Bank, Australia’s population grew by 1.4 percent in 2016, which is higher than many countries and will boost demand.

It compares favourably to some other major economies including India (1.1 percent), UK (0.8 percent), US (0.7 percent), China (0.5 percent) and Japan (-0.1 percent). Australia’s population is older than in some. Globally, there is a risk that recent improvements in economic conditions prove unsustainable. China’s economy still faces risks from its high level of indebtedness, including the risks inherent in the shadow banking system. China’s growth trajectory could face challenges in the medium term, as authorities attempt to divert growth from investment and manufacturing, towards consumers.

"Despite the potential risks to economic growth, we expect Australia’s economic growth to continue, although at a sub-par pace. Globally, the recent pickup in the pace of economic growth is expected to be maintained, providing support to Australia’s economy," St. George Economics commented in its latest research report.

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