Global and Australian economic outlook – September 2016

Economic outlook – September 2016

Following Brexit, there is much to watch when it comes to the economic state of the UK and Europe. More locally, the debt levels in China and new dwelling investments in Australia must be considered.

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Global Economic Outlook

  • The Brexit outcome and how that plays out in terms of renegotiated trade policy between the United Kingdom (UK) and Euoropean Union (EU) member states will be interesting. Whether the EU member states allow free trade, or if they are more punitive in how they deal with the UK could really slow down the European economy even more so than anticipated.
  • Problems associated with European debt still exists. What’s
    going to happen with Greek debt, Italian debt, Portugese debt, are influencers that are starting to bubble to the surface.
  • The Chinese economy is still something to watch. The debt levels in China are increasing, particularly private sector debt. Issues around the housing market and housing bubble in China are important, but the Chinese Government has still got a strong hand to play in the adoption of new policies like ‘one belt, one road’, which could see about $250 billion worth of investment activity occur, and help stabilise the Chinese economy going forward.

Australian Outlook

We see the economic conditions over the next 6 months to be a little bit mixed.

  • What’s driving that outcome is the combination of a softness in the investment sector – both business investment, where we’re seeing a transition from the mining sector to the broader economy, – and a weakness now emerging within the housing sector, particularly investment in new dwelling construction. We’re seeing an overbuild in new apartments and once that tapers off, we should see a slowdown more generally within housing investment.
  • The combination of those two factors will see economic growth for financial year 2017 dip a little. For this year we’re anticipating economic growth to be about 2.7 percent, but for next year we’re only anticipating that growth to be about 2.6 percent.

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