OECD projects positive outlook for Australia, expects growth at 3 pct by 2018

In its Global Economic Outlook released overnight, the Paris-based Organization for Economic Cooperation and Development (OECD) presented a positive outlook for the Australian economy, projecting growth to pick up to 3 percent by 2018. The OECD notes that as resource investment tails off, consumption, investment and the jobs market are likely to improve.

The OECD expects no further easing from the Reserve Bank of Australia and expects the central bank to start raising rates towards the end of 2017 as spare capacity fades. OECD cites housing market developments as the reason behind its forecast. The organization, however, noted that significant housing market concerns remain and there is growing discord between financial market developments and rest of the economy due to the low-interest-rate environment.

While S&P may have sounded the alarm on Australia’s AAA rating, the OECD does see “space for fiscal loosening given the low public-debt burden” and suggests “accelerated” infrastructure spending could pay dividends across the economy”. It said that incase of disappointment in growth, fiscal policy, not the monetary policy will be employed do the heavy lifting given housing market concerns.

Data released earlier today showed Australia Housing Industry Association’s (HIA) new home sales fell sharply in October by 8.5 percent. In absolute terms, total new home sales hit the lowest level since July 2014. Focus will be on tomorrow's Building Approvals for October with September showing a bigger than expected 8.7 percent drop.

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