The Year Ahead – Colonial First State
Here’s a preview of the next 12 months, from the perspective of our partners at Colonial first State.**
Prospects for the Australian economy remain good. The Reserve Bank recently said that GDP growth would be around 3½ per cent on average in 2018 and 2019.
Aussie consumers are spending, underpinned by lower prices and a strong job market. Consumer confidence is above longer-term averages (or ‘normal’ levels’). Household consumption is growing close to 3 per cent – near the strongest annual rate in six years.
Overseas buyers continue to embrace our high quality mining and consumer goods while tourists and students flock ‘Down Under’.
As a result, business conditions and confidence are generally seen as good. Consumers are spending and profits are rising.
Businesses are also ploughing back money into their operations and are investing. Similarly, state and federal governments are actively spending on infrastructure. Transport infrastructure dominates, but the firm population growth rates across the country are necessitating more social infrastructure such as schools and hospitals.
Inflation and wage growth are lifting. In fact there is more evidence of labour shortages and higher wages, especially in the mining sector. Trends in these areas will prove pivotal to whether the Reserve Bank begins ‘normalisation’ – starts to lifts rates later in 2019
In terms of the Aussie dollar, we think the US Federal Reserve is getting closer to pausing in the rate hiking cycle. At the same time, higher wages are the pre-requisite to higher rates in Australia. US-China trade discussions will also determine where the Aussie is headed. That said, China is already actively stimulating its economy. This time next year, the Aussie is seen closer to US75 cents.
** Source: https://www3.colonialfirststate.com.au/adviser/investments/news-updates/market-updates/the-big-issues-of-2019.html The above is a condensed summary of the full market update. For further details speak with a local Financial Adviser