Australia Economic Forecast

Australia Economic Outlook

November 13, 2018

Economic activity likely softened in the third quarter, although its pace of expansion should have been robust overall. Retail sales expanded only modestly in the July–September period, despite lower inflationary pressures and the declining unemployment rate. A weaker pace of job creation, declining house prices and the high level of household debt likely drove the deceleration in consumer spending in Q3. On the other hand, external demand was buoyant in the third quarter. The trade surplus more than tripled in annual terms in the period, as exports recorded double-digit rates of expansion throughout the quarter on the back of buoyant growth in overseas sales of commodities. Meanwhile, in the political arena, the conservative government lost its one-seat parliamentary majority; it will thus have to rely on the support of six independents after independent candidate, Kerryn Phelps, gained victory in a crucial by-election held on 20 October, replacing former Prime Minister Malcolm Turnbull.

Australia Economic Growth

The defeat at October’s by-election is a sign of electoral weakness within the governing coalition, which is lagging behind the Labor Party in the polls ahead of next year’s federal elections. The uncertain political outcome could cool investor sentiment next year, while escalating trade tensions could take a toll on growth. That said, the economy should continue to expand at a solid pace in 2019—even if it softens somewhat as expected—thanks to robust external demand for commodities and sustained business investment. Met the why particular panelists expect GDP to expand 2.8% in 2019, which is unchanged from last month’s forecast, and 2.6% in 2020.

Australia Economy Data

20132014201520162017
Population (million)23.323.724.024.424.8
GDP per capita (USD)64,99461,43351,34151,90355,690
GDP (USD bn)1,5161,4541,2331,2661,379
Economic Growth (GDP, annual variation in %)2.22.62.52.62.2
Consumption (annual variation in %)-  -  -  -  -  
Investment (annual variation in %)-1.7-2.0-3.6-2.13.1
Exports (G&S, annual variation in %)5.86.96.56.83.5
Imports (G&S, annual variation in %)-2.0-1.41.90.27.8
Industrial Production (annual variation in %)1.03.70.81.51.1
Retail Sales (annual variation in %)3.25.54.53.72.4
Unemployment Rate5.76.16.15.75.6
Fiscal Balance (% of GDP)-1.2-3.0-2.3-2.4-1.9
Public Debt (% of GDP)30.634.137.811.641.6
Money (annual variation in %)8.76.311.96.55.4
Inflation Rate (CPI, annual variation in %, eop)2.81.71.71.51.9
Inflation Rate (CPI, annual variation in %)2.42.51.51.31.9
Inflation (PPI, annual variation in %)1.61.71.40.91.6
Policy Interest Rate (%)2.502.502.001.501.50
Stock Market (annual variation in %)14.80.7-0.87.07.8
Exchange Rate (vs USD)0.890.820.730.720.78
Exchange Rate (vs USD, aop)0.970.900.750.740.77
Current Account (% of GDP)-3.2-3.2-4.8-3.1-2.5
Current Account Balance (USD bn)-48.5-46.7-59.0-39.2-34.0
Trade Balance (USD billion)20.311.9-13.13.111.0

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Australia Facts

ValueChangeDate
Bond Yield2.441.47 %Dec 11
Exchange Rate0.720.05 %Dec 11
Stock Market5,6280.08 %Dec 11

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