DON'T BANK ON A RECESSION JUST YET, SAYS FORECASTER

Written on the 26 August 2015 by Nick Nichols

DON'T BANK ON A RECESSION JUST YET, SAYS FORECASTER

THE Australian economy may have hit reverse gear in the June quarter, according to BIS Shrapnel, although don't bank on a recession just yet.

Despite an overall upbeat view that the housing boom still has 18 months to run and that the end of the decade will bring better times, the economic forecaster has warned of a tough three years ahead for some.

Richard Robinson, BIS Shrapnel's associate director of economics, is having an each-way bet on whether the June quarter will record a negative GDP figure.  At the very least, he is forecasting GPD to have dipped below 2 per cent.

But it's not all bad news as the company's Long Term Forecasts 2015-2030 report predicts a falling Aussie dollar will provide the impetus for a structural shift in the economy to deliver a broader recovery to sectors that were largely "neglected" by the mining boom.

"The next three years will be tough for parts of the economy as the country makes the structural shifts required," says Robinson.

"And a return to competitiveness will not be uniform across the country.

"In the immediate term, growth in the 2015 June quarter may have been a small negative, which will alarm many pundits, and spark talk of a recession.

"If the June quarter growth is around zero, then through-the-year growth will be around 1.7 per cent (June quarter 2015 compared to June quarter 2014).

"But we believe this quarter will be a blip on the radar. The economy will recover over the next two quarters albeit while remaining soft."

The BIS Shrapnel report comes on the heels of one of the worst weeks on global stock markets in six years, driven largely by concerns over China's growth prospects.

Although China's fortunes are pivotal to Australia's economic future, BIS Shrapnel forecasts that growth will rebound over the September and December quarters which will take Australia's annual GDP growth above 2 per cent.

It is forecasting GDP in FY16 to grow to 2.5 per cent from 2.3 per cent last financial year. The average over the next five years is expected to rise to 3.1 per cent, although BIS Shrapnel has based this on a "late decade, broad-based rebound".

The rebound is in part likely to be driven by the falling Australian dollar, which BIS Shrapnel says will "hasten cultural change".

The Aussie dollar is expected to fall below US70c within three years, aided by the US Federal Reserve lifting interest rates.

"We have already seen the beginning of the stimulus to tourism and education services," says Robinson.

"We expect the tourism industry to perform strongly into the medium-term, assuming the dollar remains competitive. After a decade in the doldrums as a result of the high dollar, it will be making up lost ground.

"An influx of tourists from China is already boosting growth. As tourism demand and revenues pick up, tourist facilities will be refurbished, catching up on a decade of neglect. Then we will build new facilities to cater for the growth in demand.

"The strength of tourism will drive regional growth as we feed, clothe, house, entertain and transport tourists, with a corresponding flow on to the rest of the economy just as we experienced during the mining boom."

As for the property market, BIS Shrapnel forecasts another 18 months of strong residential building before the cycle starts to falter.

However, don't expect the latest cycle to benefit all markets. BIS Shrapnel says stock shortfalls in parts of Queensland and NSW will most benefit those markets.


Author: Nick Nichols

Latest News

STARSHIPS WERE MEANT TO DELIVER DOMINO'S PIZZA

NICKI Minaj may have been off the mark when she declared 'starships were meant to fly'. However, she m...

QUEENSLAND WEATHER UPDATE: MAJOR AIRPORTS STILL IN BUSINESS DESPITE CANCELLATIONS AND DELAYS

DESPITE the storms and flash floods which are continuing to wreak havoc across several Queensland cities and towns...

STARS ALIGN AS GOLD COAST ICON REBRANDS

TODAY marks a shift in the Gold Coast's constellation as the iconic Jupiters Hotel and Casino officially rebra...

OROTON GOES CLICKS AND BRICKS AS PROFITS SLIDE

TWO former Aussie lawyers have turned their passion for fashion into a $15 million dollar international business six ...

Related News

STARSHIPS WERE MEANT TO DELIVER DOMINO'S PIZZA

NICKI Minaj may have been off the mark when she declared 'starships were meant to fly'. However, she m...

RAY OF HOPE FOR SLATER AND GORDON AS LENDERS STEP IN

EMBATTLED law firm Slater and Gordon (ASX: SGH) has announced to the ASX that it has launched confidential discussion...

SPROUTX PROVIDES THE SEED FOR AGTECH STARTUPS

AGTECH innovation fund SproutX has opened applications for its first accelerator round, backed by $10 million from...

GAS PRICES MAY FORCE BRICKWORKS TO TAKE MANUFACTURING OVERSEAS

BRICKWORKS Limited (ASX:BKW) chairman Robert Millner says soaring energy prices may force the company to turn to offs...

EVENTS COMING UP

 

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter