Australia MYEFO: Real GDP growth to rise as the drag from mining investment diminishes

Australia Mid-Year Economic and Fiscal Outlook (MYEFO) released today says the real GDP is seen rising as the drag from the mining investment diminishes.

Key points

• Real GDP is forecast to grow by 2½ percent in 2017-18 and 3 percent in 2018-19, compared to 2.0 percent achieved in 2016-17 and Budget forecasts of 2¾ percent and 3 percent for 2017-18 and 2018-19 respectively.
• Nominal GDP is forecast to grow by 3½ percent in 2017-18 and 4 percent in 2018-19.
• The 2017-18 forecast is lower compared with Budget, largely reflecting recent subdued outcomes for wage growth and domestic prices.
• Commodity prices remain a key uncertainty to the outlook for the terms of trade and nominal GDP.
• Household consumption is forecast to grow by 2¼ percent in 2017-18 and 2¾ percent in 2018-19.
• Growth in consumption is expected to pick up over the forecast period in response to strengthening labour market conditions.
• Business investment is expected to grow at a stronger pace than forecast at Budget. It is forecast to grow by 2 percent in 2017-18 and 3 percent in 2018-19.
• Growth in non-mining business investment was stronger than expected in 2016-17 and is forecast to remain solid at 5 percent in both 2017-18 and 2018-19.
• Exports are forecast to grow by 3 percent in 2017-18 and 4 percent in 2018-19.
• Imports are forecast to grow by 3 percent in 2017-18 and 2½ percent in 2018-19.
• Consumer prices are forecast to increase by 2 percent through the year to the June quarter 2018, before accelerating to 2¼ per cent through the year to the June quarter 2019.
• Budget deficit seen at AUD 23.6 billion.