The World on Two Pages – September 2015

There is increasing evidence that growth momentum is broadening across the the non-mining Australian economy – not limited to the dwelling sector – in response to the lower AUD and interest rates, with improvement particularly evident in services sectors.

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The Bigger Picture – A Global & Australian Economic Perspective

Global: Global growth remains sluggish and below trend and we have slightly lowered our forecasts to take account of weaker than expected outcomes in India, Canada and Brazil. The bursting of the Chinese share market bubble and the authorities’ confusing response adds further unwelcome volatility and uncertainty to an already uninspiring outlook. We expect growth to remain soft and below trend through the next two years with no sign of any imminent upturn in activity and sizeable downside risks.

Australia: The Australian economy is still struggling to transition to non-mining sources of growth amidst lower national income. Against that, there is increasing evidence that growth momentum is broadening across the non-mining economy – not limited to the dwelling sector – in response to the lower AUD and interest rates, with improvement particularly evident in services sectors. Our 2015/16 GDP forecast has been revised down to 2.4%, reflecting a weaker than expected Q2 result, while the 2016/17 forecast is unchanged at 3.1%. The unemployment rate is expected to ease to 6% through 2015/16 and to 5¾ in 2016/17. While risks to the outlook stemming from financial market volatility and a slower China are front of mind, stronger local momentum in the non mining sector is expected to keep the RBA from cutting rates further.

For more details, please refer to the attached documents.