The Australiance team had the opportunity to attend a conference organized by the French-Australian Chamber of Commerce & Industry (FACCI), on the 12th of February in Sydney.
Mr. Bloxham presented his vision of the global and Australian economy for 2019. Tougher times might be to expect in 2019 since the global economy witnesses a good growth these past few years. Countries got back on their feet after the 2008 economic crisis and the global economy began the year 2018 on a positive note following the acceleration of global production and trade throughout 2017. However, the second half of 2018 was not as good. Tariffs applied by major countries, in particular the United States, and the measures taken in retaliation by other countries, including China have been raised because of the lack of confidence from investors. Donald Trump’s protectionism lead to greater uncertainty in trade policy, which weighs heavily on investment decisions. Despite this, the US economy expanded rapidly in 2018, with tax cuts and demand stimulated by increasing expenses leading to a raise of the US dollar value.
Global growth as been above trend but its slowing
Source: Refinitiv Datastream, HSBC forecasts
After an economical hectic year, what trajectory will the Australian economy follow in 2019?
1) Global Story
With its massive investments, China is the engine of Australian growth (2.2% in 2017). It is Australia’s largest market, the result of one-third of its exports.
Services exports grow as Asian middle-class incomes rise
Australian Services Exports, Rolling annual totals, AU$bn
It is also a major asset for its tourism economy – in 2017, 7 billion euros have been generated through tourism and China represents more than 50% of this total. China commodity prices have been raising to face its growth, slowed during the last few months. China has been implementing environmental policies to cut back domestic consumption. China needs less coal and need more steel while Australia produces a lot of high-quality steel. Mr. Bloxham underlined that it is a major economic opportunity for Australia in 2019. In addition, there has been an increase in the corporate tax rate in 2018. The federal budget is almost back to surplus which means that significant investment spending will be made in 2019, good for start-ups!
Australia’s budget has been improving rapidly
Government Underlying Cash Balance, AU$ bn
Source: Australian Department of Finance
2) Housing Market
Housing market is going to be another opportunity in Australia in 2019. It grew a lot these past years because of a strong demand but the foreign demand recently slowed down. The global interest rate then stopped falling. Prices are expected to decline at a similar pace in 2019 in Sydney and Melbourne, where larger falls have occurred.
Housing prices are falling in the two largest cities
Housing prices in major cities
Sources: CoreLogic RP-Data-Rismark
3) Invest in 2019!
Leading indicators for business investment suggest that it will pick up some of the weaknesses left elsewhere. Strong growth in profits, increased capacity utilisation, low borrowing costs for businesses and the need to spend money to maintain Australia’s growth in investment over 2019.
The Australian economy will therefore have ups and downs during 2019. We will retain the positive points of a solid economic growth overall. Investment among other things, will be in the sights of many in Australia to keep a dynamic economy.
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