Spotlight – Great news! Australia’s economic growth continues

It’s not often you see a headline claiming great news! But Australia’s record breaking long stretch of economic growth has continued. The economy is continuing to grow at a reasonable pace, expanding by 2.8% over the year ending 30 September 2017.

This positive result of 0.6% growth over the quarter means that Australia has avoided a 'technical recession’ (two consecutive quarters of negative economic growth) for 26 years. This is a remarkably long period.

The economy’s growth rate in September was around average so we are neither in a boom nor a slowdown in Australia ­­— as you can see in the chart below.

Graph showing economy's growth rate from 1990-2017

Source: DataStream

Robust growth in the quarter has been largely supported by a strong business sector and better overseas conditions:

·         Business conditions as reported by the NAB Business Survey remain strong.

·         Expectations of non-mining investment have improved, which suggests that businesses in the sectors of the economy excluding mining have a more positive view of the medium-term outlook.

·         Employment growth has been very strong, with the unemployment rate at 5.4% in November.

·         Conditions in the global economy improved in 2017, as noted by the RBA in November.

However, consumer spending and confidence have been relatively weak, likely reflecting concern about high household debt loads and relatively soft wages growth.  We anticipate Australia will continue to grow at a moderate pace in 2018.  The outlook for the Australian economy is one of the factors considered when we design the asset allocation of Cbus’ diversified investment options.