Global & Australian Forecasts – December 2014

Recent monthly economic indicators and business surveys show continued moderate global economic growth along with big variations between economies. Low interest rates, falling oil prices and smaller budget cutbacks in big advanced economies underpin faster growth of 3½% in 2015 and 2016.

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Key Points:

  • Recent monthly economic indicators and business surveys show continued moderate global economic growth along with big variations between economies. Low interest rates, falling oil prices and smaller budget cutbacks in big advanced economies underpin faster growth of 3½% in 2015 and 2016. Global economic growth should remain heavily reliant on an upturn in India accompanied by continued good performance in China and the US. Headwinds to global growth should come from weakness across Japan, the Euro-zone and Latin America.
  • Softer commodities outlook and prospect of more severe deterioration in labour market mean we have changed our rate call to two cuts of 25 bpin March and August 2015, then on hold until late 2016. GDP forecasts cut reflecting weaker history and terms of trade: 2014/15 2.5% (was 2.9%); 2015/16 3.0% (was 3.2%). Unemployment rate now to peak at around 6¾% (was 6½%).

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