Australia: Stimulus props up the outlook – ANZ

Felicity Emmett, analyst at ANZ, suggests that Australia’s economic growth is set to pick up in the second half of 2019, with the low point likely to have been Q2 2019.

Key Quotes

“Stimulus from both interest rate cuts (both actual and forecast) and tax cuts will be a key driver of the pick-up. Without this stimulus, growth would have been materially lower.”

“The momentum in household spending will be key to the outlook. We expect consumer spending to pick up, but there is a high degree of uncertainty about the impact of the tax cuts. Business investment is likely to remain lacklustre. Public spending and exports will be the key drivers of growth in the near term.”

“The slowdown in growth to date is already feeding through into a weaker labour market. We think the unemployment rate will climb a little further from here, peaking at 5.4% before improving very gradually through 2020-21.”

“The risks around the outlook, both global and domestic, remain considerable. On the international front, the key risk is that an escalation of trade tensions sees a further deterioration in the outlook.”

“Domestically, our main concern is the consumer: the impact of the tax cuts and the ability of households to grow spending in an environment where income growth is soft and the debt burden remains high.”