What is in store for Australia’s economic growth in the year 2016? That question has elicited an encouraging answer. It has been laced with modest optimism and a positive year is predicted. According to a leading economist from the Bank of America Merrill Lynch, Australia will gain from the stabilising global growth and its weaker dollar.
Alex Joiner, the bank’s economist said there are 10 themes to watch for when tracking Australia’s progress in 2016 as it transits from the mining driven boom to a diversified economy. Joiner listed out 10 main variables that need to be tracked for scaling Australia’s economic progress. The themes are GDP, Services, Unemployment, House prices, Construction, Consumption, Inflation, Current government and Interest rates, reports The Australian Financial Review.
According to Joiner, Australias’ GDP growth in 2016 will be 2.7 percent, marginally up from 2015’s expected 2.3 percent. Though the drag from the retreat of resources boom will be there, its “hangover” would be marginal.
“As this drag becomes less, growth rates will likely to become at least modestly more flattering as we move into 2017,” he said. The economist said services would make a significant contribution to the growth. But that depends on the Australian dollar remaining weak. He said the service sector is fuelled by many domestic factors. They include soaring demand for healthcare, social services, education, financial services, housing and construction, plus the external demand from China.
“Yet these services that account for around 53 percent of the economy and 59 percent of employment account for only 36 percent of the fixed asset investment,” Joiner said.
In the matter of unemployment, Bank of America Merrill Lynch sees certain risks ahead. And more job losses are not ruled out. According to Joiner, unemployment rate will be an average 6 percent in 2016. But house prices will fall in 2016. The peak was recorded in Sydney and Melbourne.
In cities of resources-led states such as Brisbane and Perth that peaking is yet to happen. The American bank’s economist also said 2016 will see dollar hitting US65¢ as interest rates in the US will go up. At the same time, domestic rates of Australia are on hold.
Regarding the big picture of Australia’s growth in 2016, the banker said much will depend on the success of Prime Minister Malcolm Turnbull’s economic reforms. He said the most important element will be the government’s ability to hard sell those reforms. He cited GST reform in Australia as a test case.
Meanwhile, Treasurer Scott Morrison said the government’s long-awaited tax white paper on Australia will be presented to voters before the next election. He said a meeting of the state treasurers will be held in February to discuss the ways and means for growing the economy, reports SBS News.