Global growth leveled off through late 2013 and early 2014, partly due to bad weather hitting North America. Advanced economy upturn looks set to continue as interest rates stay low and as the peak in fiscal consolidation has passed. Mixed picture among emerging economies with China gradually slowing while India forecast to pick-up after recent economic disappointments. Global growth a touch below 3½% in 2014, slightly above it next year. Australian business confidence undamaged by Budget but conditions still drifting down. GDP growth strengthened in Q1 from net exports but employment-generating demand remained weak. Local economy forecasts a little higher (from history) but otherwise unchanged: cash rate on hold until late 2015 and unemployment to edge up.

• The generally upward trend in advanced economy purchasing manager surveys began to fade through late 2013 and 2014 and that has been followed by a leveling out in the rate of growth in world trade and industrial output. Growth in North America should pick up following the disruption caused by the harsh winter. Policy is becoming more positive for growth in the Euro-zone and the UK economy looks set to continue a solid recovery. While Japanese demand has to adjust to the imposition of a higher indirect tax rate, the underlying economic situation looks far better than it did after previous tax hikes. Among the emerging economies, China is slowing and while an upturn is expected across the rest of East Asia and Latin America, there is little sign of it yet. Overall, global growth should be around trend this year and above trend in 2015.
• Australian business confidence emerged unscathed from Budget but conditions drifted down for third consecutive month and now negative. Stronger GDP growth was supported by net exports and dwelling investment, but consumption growth was weak and business investment fell again (non-mining yet to fill gap). Forward indicators from survey remain weak. Dwelling market surge subsiding and construction to soften.
• Australian forecasts marginally higher (reflects history): 3.3% (was 3.1%) 2014/15, 3.0% (was 2.7%) in 2015/16. However domestic demand growth likely to remain at 1% or less going forward. Hence jobless growth still sees unemployment rate peak at 6¼% by end-2014. Cash rate unchanged until late 2015.

For further analysis download the full report.

• Global & Australian Forecasts – June 2014 (492KB, PDF)

Also available:

Monthly Business Survey – May 2014(267KB, PDF)