Chart of the week: Australia’s economic growth accelerates but watch out for those brakes

7 June 2018

Bob Cunneen, Senior Economist and Portfolio Specialist
 

                                           Global economic activity

*The countries collectively known as the Group of Seven (G7) consists of  the US, Canada, the UK, France, Germany, Italy and Japan. BRIC refers to Brazil, Russia, India and China.

Sources: NAB Asset Management Services Limited, Thomson Reuters, Australian Bureau of Statistics. 

After a few years in the slow lane, Australia’s economic growth is accelerating. Australia’s annual growth rate for the year to March 2018 is now registering at 3.1% (red line). Encouragingly, Australia also appears to be finally catching up to global growth which is approaching 4% for the past year (blue line).

However there are some brakes currently being applied to Australia’s growth performance. Consumer spending has recently moderated given the challenges of high household debt and subdued wages growth. The housing construction boom also seems to have peaked.  Tighter lending standards, higher interest rates for housing investors and concerns over the potential oversupply of apartments is now providing a speed limit to construction activity.

Even with these brakes, Australia should manage solid economic growth this year.  Australia’s interest rates remain low and employment growth is strong.  Our export performance will also benefit from stronger global growth. Government spending on transport infrastructure spending is also notably in the fast lane. While the Australian economy can expect to maintain a reasonable growth speed close to 3% in 2018, it’s likely to trail in the wake of faster global growth. 

Source : Nab assestmanagement June 2018

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