Key Points:

• There was no evidence of an acceleration in the pace of global growth in early 2015. Weak GDP results in the US, UK and Canada outweighed a pick-up in Japan and the Euro-zone and similarly mixed trends among the big emerging economies saw China slowing, India picking up and Brazil still very weak. The monthly manufacturing output and world trade numbers were soft, particularly the latter, and the business surveys do not show any clear evidence yet of an imminent lift in growth momentum. Our forecast is for more of the same this year with global growth staying around 3¼% in 2015, followed by a modest upturn in 2016 (largely driven by the US).

• We have fine tuned but not fundamentally changed our forecasts– 2014/15 2.4%(was 2.3%), 2015/16 2.6%(was 2.9%) and 3.0% (unchanged) in 2016/17. The big picture is still one where the domestic economy is struggling to offset the impact of sharply lower mining investment – as again highlighted in the Q1 National accounts. Subsequently there has been some improvement in recent short term data – especially the May NAB survey which suggests business confidence improved post the Budget and rate cuts – as did business activity, capex spending and capacity utilisation. Against that, capex expectations in the non mining sector has weakened, business remains reluctant to employ and consumers remains cautious. With future domestic demand still weak, unemployment is expected to rise a touch to around 6.4% by end 2015 and remain relatively for some time. Based on our forecasts for activity, the labour market and inflation, we see the RBA as having finished cutting – albeit that depends on (our and the official family’s) forecasts being achieved. We see the next move in rates as up – but not till late 2016 ( and with a lower end point for the Official Cash rate of 3.5%).

For further details, please see the attached documents.

• Global & Australian Forecasts – June 2015 (PDF, 561KB)