Morgan Stanley Says Australian Growth Will Be Near Recessionary Levels In 2015 - Here's What You Need To Know

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Morgan Stanley acknowledges they are bottom of consensus in terms of Australian GDP growth with an expectation that GDP will fall to just 1.5% year-on-year by the end of 2015.

The basis of their pessimistic outlook is four shocks which have occurred in the Australian economy:

  1. Faster terms of trade deterioration than expected given the supply-shock and China’s accelerated rebalancing,
  2. An alarmist Budget narrative dampening consumer spirits,
  3. A stronger housing recovery in 2014 forcing a mixed policy outlook for 2015, and
  4. A household income shock given job losses and negative mix effect from the resources transition.

They say that this all “paints a negative picture and puts domestic demand close to recessionary levels in 2015”.

Not good news but further evidence that the RBA is more likely to cut rates than raise them and that the Aussie dollar will drift lower toward Morgan Stanley’s target of 76 cents against the US dollar.

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