Key Points:

• Moderate sub-trend global growth continues with a diversity of economic conditions (solid expansion in US, UK, India and China, weakness in Euro-zone, Japan, Latin America). Falling oil prices should boost global activity, although the impact varies between oil exporting and importing countries. Our estimates are conservative but lower oil prices still boost our forecasts for the US, Japan, Euro- zone, India, China and non-Japan Asia while Russia and other big energy suppliers are revised down. Adding in the other (mainly negative) recent changes in the environment gives growth going from 3% last year to 3½% in 2015 and 2016.
• Fully factoring in lower oil and other commodity forecasts have created a larger “v” in the shape of our activity forecasts – softer in the near term (2014/15) as iron ore/coal effects dominate but stronger in the medium term (2015/16) reflecting oil prices, rate cuts and marginally stronger MTP growth and exports. Cuts to national incomes and lower inflation are key short term outcomes. Core CPI 1¾% by Q1 2015. Unemployment to continue to deteriorate but peak lower (6.6%) and later(Q4 2015). Still expect two rate cuts in 2015 but timing very dependent on data flow and could start a touch later.

For further analysis download the full report.

• Global & Australian Forecasts – January 2015 (PDF, 672KB)

Also available:

• Monthly Business Survey – December 2014 (PDF, 234KB)