Australia: Economic uncertainty looms – Westpac

Elliot Clarke, Research Analyst at Westpac, note that the recent RBA minutes of the March meeting highlighted the uncertainty that is at play in Australian economy.

Key Quotes

“Growth is still “expected to exceed potential”, but “uncertainty surrounding the outlook for consumption growth” remains. A sizeable upward revision to consumption was seen in the December quarter national accounts after the March RBA meeting, but a large portion of that strength was on spending outside of Australia which does not contribute to our GDP. Since then, our Westpac–MI Consumer Sentiment survey has again pointed to spending restraint amongst consumers. As highlighted by the March minutes, a necessary acceleration in wage gains is only occurring at a “gradual” pace.”

“On business investment, after a long discussion, the Board noted potential upside for non-mining investment (and therefore GDP growth) in the medium term. However, the tone of this discussion clearly emphasised that this was a risk not part of their core view. It therefore seems highly likely that GDP growth will remain below trend in 2018 and 2019 (2.7% and 2.5% respectively on our view).”