FXStreet – Imre Speizer, NZ Markets Strategist at Westpac, suggests that the ongoing transition of the Australian economy from the mining investment boom remains the central focus of policymakers.
Key Quotes
“It is fair to say that the pace of the transition has disappointed forecasters and policymakers alike, and the combined headwinds of declining investment and falling terms of trade will continue through 2016. That said, the recent further fall in the AUD, stronger consumer sentiment and burst of employment strength suggests we should not be overly bearish as we head into 2016.
The deterioration in Australia’s terms of trade is set to continue, as commodity prices decline. Our forecast is for another fall of around 10% in 2016. That will continue to squeeze incomes and profits, but, as with the year just gone, consumer spending should hold up with a fall in the savings rate and a further boost to jobs growth.
The housing sector is beginning to cool as well, and tighter lending standards, higher mortgage rates and macro-prudential policies should lead to a consolidation of building activity in 2016.
That sees us forecast around 2.75% growth in 2016 (lower than the RBA’s 3% forecast) but still around trend and consistent with steady interest rates in 2016.
It is also important to note that 2016 will be an election year and we have no doubt that debt and fiscal policy will be a key election issue.”
(Market News Provided by FXstreet)