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Oliver's Insights - The Australian economy - five reasons growth will continue

The Australian economy - five reasons growth will continue but unlikely to be enough to justify rate hikes until 2019?

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note takes a look at economic growth in Australia and the implications interest rates and investors. The key points are as follows:


  • The Australian economy grew 2.4% through 2017, good but well below potential given high population growth.
  • There is good reason to expect growth to continue and pick up a bit: the drag from falling mining investment is nearly over, non-mining investment is turning up, public investment is strong, trade should add to growth and profits are rising. But growth is likely to be constrained to just below 3% this year and underlying inflation is likely to remain low.
  • We don't expect the RBA to start raising rates until 2019 (we were looking for a hike late this year). Australian shares are likely to move higher by year end, but to continue underperforming global shares.

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