Australia’s economy hit an air pocket early this year as bad weather took a toll on activity, but analysts polled by Reuters believe growth will pick up for both 2018 and 2019 and extend the country’s amazing run without recession.
Economists estimated Australia’s A$1.7tn ($1.35tn) of annual gross domestic product (GDP) would grow 2.3% this year, compared to 2.6% in the April poll.
The downgrade follows a disappointing first quarter when GDP eked out a rise of just 0.3% as poor weather hit exports and home building.
The economy looks to have got back on track in the second quarter with exports recovering strongly, particularly for coal and liquefied natural gas, and consumers spending more freely at retailers and car dealers.
The country’s central bank saw much to be pleased about at its July policy meeting citing higher household consumption, a pick-up in public investment and rising employment.
“The data available for the June quarter had generally been positive,” minutes of the Reserve Bank of Australia’s (RBA) meeting showed. “The strength of recent labour market data had removed some of the downside risk in the Bank’s forecast of wage growth.”
Analysts were also cautiously optimistic, forecasting economic growth would accelerate to 2.8% for both 2018 and 2019.
If correct, that would be a notable achievement given the country has not had a technical recession since 1991.
One soft spot has been record high levels of household debt which has threatened to crimp spending power in the face of subdued wages growth.
“The household sector remains a point of relative concern for the outlook,” said NAB’s chief economist Alan Oster.
“In stark contrast, improved profit outcomes have seen firms reporting the best conditions they have seen for years,” he added. “How the disparity will resolve itself is still unclear, although recent indications have been encouraging.”
He tipped growth of 2.75% for both 2018 and 2019.
One positive for the outlook was a lack of price pressures, with economists forecasting inflation of a benign 2.2% all the way through 2018.
That should mean the RBA could take its time in lifting interest rates, which have been at a record low of 1.5% for almost a year now.
A container ship is loaded with cargo at the Port Botany Container terminal in Sydney. Australia’s A$1.7tn ($1.35tn) of annual gross domestic product (GDP) would grow 2.3% this year, compared to 2.6% in the April poll, economists estimated.
