Global: Global growth remains stuck at a sub-trend pace. After 3.3% in 2014 we now expect only 3.4% in 2015. While the Euro-zone and Japan are experiencing upturns, recent US data has disappointed. We have delayed the Fed starting till September (or later) and reduced US GDP in 2015 to 2.7%. March quarter business surveys do not suggest any acceleration in advanced economy growth – which we require to achieve the 2015 forecast. There is no evidence of an upturn in emerging market economy growth either.

Australia: We have fine tuned but not fundamentally changed our forecasts– 2014/15 2.3% and 3.0% in 2015/16. The non mining sector is still struggling to offset the impact on domestic demand of sharply lower mining investment. Further falls in commodity prices are lowering income flows. A particular concern is the weak medium term outlook for non mining investment, while the consumer remains cautious. As a result we still see unemployment rising to 6.7% by end 2015. Another rate cut is expected – most likely May but could be delayed if the economy improves (tentative signs of this in the March NAB Business Survey). We see the probability of a cut to below 2% being around 35-40% – well below market expectation (fully priced). Rate rises to start in late 2016.

For more details, please refer to the attached document.

• Australia & the World on two pages – April 2015 (PDF, 50.4KB)