Australia: Growth accelerates, but slow down expected - Westpac

The Australian economy appears to have stepped up a gear in 2017, following a disappointing 2016, against the backdrop of stronger world growth, according to analysts at Westpac.

Key Quotes

“This is consistent with our long held view that the economy’s performance this year will be relatively sound and ahead of an expected slowdown in 2018, led by a fall in home building activity, as well as a loss of momentum in China.”

“We continue to forecast annual real GDP growth to strengthen to 3.0% in December 2017 before moderating to a below trend 2.5% in December 2018. Importantly, as we have emphasised, the economic expansion is uneven. There is strength in construction activity, public and private, and exports, but a lack of momentum in consumer spending.”

“While national income and business profits received a boost from recent higher commodity prices, wages growth has disconnected, remaining at historic lows. This is at a time of high and rising household debt. Recently, household have also been affected by rising energy costs and tighter lending standards for the housing market. Business investment will be held back if the consumer remains subdued as expected.”