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The Australian Economy in 2016–17: Looking Beyond the Apartment Construction Boom
Author(s) -
Robinson Tim,
Nguyen Viet H.,
Wang Jiao
Publication year - 2017
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12212
Subject(s) - boom , apartment , library science , citation , history , media studies , art history , sociology , political science , engineering , law , computer science , environmental engineering
The transition in the sources of growth away from the mining sector continued in 2015–2016. However, this transition was narrowly focused, primarily occurring in residential investment and nonresource exports. Nominal non-mining private business investment grew only moderately. Inflation was weak during 2015–2016. This reflected low global energy prices, together with subdued domestic final demand and wages growth, despite some improvements in the labour market. This lowinflation environment was a factor contributing to monetary policy being eased once during 2015–16 and again subsequently. The cash rate reached 1.5 per cent, a new low for the inflation-targeting period. Alternatively, fiscal policy settings were little changed. Looking forward, the concentration of the transition in sources of growth in the housing sector poses risks due to the substantial amount of higher density housing coming on line in several cities. Growth in resource exports, particularly liquefied natural gas (LNG) exports, will support overall output growth, despite a probable continuation of subdued domestic demand (Table 1). Wages and inflation growth appears likely to remain low and consequently monetary policy accommodative. Key international sources of the uncertainty surrounding the outlook include the prospects for Chinese economy and the future conduct of economic policy in the United States. This article is structured as follows. In Section 2, we discuss both the international economic developments that have impinged on the Australian economy and developments in the terms of trade and the real exchange rate. Section 3 summarises developments in the labour market, inflation, financial markets and the real economy. A focus of Section 3 is on recent developments and the outlook for residential investment. Finally, Section 4 concludes.