Australia: Towards a modest acceleration

Dragged by bad weather…


Bad weather conditions (Cyclone Debbie) put a drag on first-semester economic performance. Coal production and exports have been disrupted due to mines closures and damaged freight infrastructure. Tourism and agriculture have also been affected. 


GDP growth is set to pick up speed in the remainder of the year. The policy mix will aim to boost economic growth with a loose stance on fiscal and monetary policy.  


Public spending and investment are set to gather pace due to rebuilding efforts. Exports may accelerate at a gradual pace in line with improving global demand, stronger LNG exports capacity and a rebound in tourism. 


The scale of acceleration will depend on household consumption. It is likely to be moderate due to high leverage (189% of disposable incomes) and modest growth in wages. Against this backdrop, we expect GDP growth to rise by a humble +2.3% in 2017 before accelerating to +2.6% in 2018.   


The balance of risks has somewhat improved. Externally, global demand and commodity prices have gained some traction since last year. Domestically, high household’s debt and unbalanced property market pose significant risks.