Australia’s economy looks like it will dodge the dual risks of a sharp fall in housing prices and a slowing in China, according to the latest Deloitte Access Economics Business Outlook.
“The clouds around Australia’s economy are clearing,” writes Chris Richardson Partner at Deloitte Access Economics.
He says most likely path for Australia doesn’t see a triggering of China and/or housing risks.
“Rather, it sees both national income and national production growth gradually return to a steadier path, boosting wage growth as they do so, albeit slowly,” he says.
He sees a gradual recovery in wages from their current record lows of less than 2% annual growth.
“Profits are up, jobs are up, and the next train to leave the station will be wages,” he says.
The rise in wages, according to Deloitte:
“None of the three big drivers of inflation risk — a strong economy giving businesses pricing power, or wage growth outstripping productivity growth, or rising import prices from a falling $A — currently point to anything like a surge in pricing pressures.
“At best they spell out a very slow burn in which pressures will lift over the next couple of years.”
He describes Australian job growth as a thing of beauty.
“And it looks set to stay beautiful for a while longer, as good global growth lifts the demand for both labour and capital, thereby boosting the outlook for both jobs and business investment,” Richardson says.
“Better global growth (China cheer in particular) has finally flowed through to the national tax take.
“Official expectations are being bettered as profits boost company tax, jobs lift personal tax, spending boosts the GST, and house prices sprinkle fairy dust on stamp duties.
“New taxes on banks plus a bigger Medicare levy add to that, extending a long running revenue recovery since it troughed as a share of national income back in 2011.”