1NovWaiting for Growth
Posted on 1/11/2015 by Nine2Three
During the past six months, the search for growth has been the major theme emanating from CEOs, politicians, the media and our central bankers. The big question is – will we achieve economic growth, while undergoing the largest cyclical downturn in the mining and energy sector, in the past twenty-five years ? Historically, investment and output, have tended to grow much more slowly in countries, which are highly exposed to mining activity, during commodity price downswings.
Despite the improved confidence from a change in leadership at the Federal government level, the Australian economy is struggling to shift out of low gear because business and households are still fearful about the future. Much of the fear is based on concerns surrounding the continuing deterioration in the domestic mining sector and the impact a steadily slowing China will have on our economy.
While we wait for the US to increase its interest rates, the volatility on global financial markets is extinguishing any level of confidence instilled in Australian businesses considering growth opportunities.
Undoubtedly, robust growth will largely be elusive for our economy and most large companies during the next twelve to eighteen months, as we experience a slow transition away from dependence on the resources sector and the buoyant conditions created by the mining boom. However, the concerns and fears of households and businesses are ignoring the fact that the economy is transitioning, albeit slowly.
We currently have many favourable factors impacting our economy which will contribute to future growth, including low interest rates, strong residential construction and increasing government infrastructure spending. In addition, most local businesses, large and small, now have much stronger balance sheets, than a decade ago.
We believe the answer to the question of whether we will achieve growth is yes ! We believe towards the end of 2016, steadily and consistently Australian business and households will regain confidence and start to spend again, boosting our economic growth. Most of the conditions for strong economic growth are already in place but it is likely to take at least twelve months before they are grasped by the market and acted upon.
Clear evidence of the potential for a pickup in overall economic conditions, is provided by the state of the New South Wales and Victorian economies, which are respectively experiencing steady growth in numerous sectors. NSW is achieving strong retail spending, increased business equipment investment, robust car sales and solid growth in residential construction. While, Victoria’s main strengths are population growth, housing starts and commercial construction.
Important Note: These articles have been prepared for general circulation and are circulated for general informational purposes only; these articles should not be regarded as business or investment advice. The articles represent the views of the writers and are subject to change without notice. Additionally, while every care has been taken in the preparation of the articles no representation or warranty as to accuracy or completeness of any statement is given. An individual or organisation should, before any business or investment decision is made, consider the appropriateness of the information in this document, and seek professional advice, having regard to objectives, situation and needs. This document is solely for the use of the party to whom it is provided.
Posted in I Need an Economic Update
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