In the wake of yesterday’s strong, but in some quarters disappointing, Q1 GDP print of 0.9% comes the latest outlook from the OECD which supports those who believe the economic transition in Australia is occurring.
In its Economic Outlook, Volume 1 2015, released overnight the OECD said it expects slowish growth in 2015 of just 2.25% before a “pick up to nearly 3% in 2016”.
Driving the pick up will be “gathering momentum in consumption, non-resource investment and exports” which will then “help the economy recover from the fall in commodity prices and unwinding resource sector investment”.
That sounds very much like the blueprint the RBA is trying to follow as well.
But the OECD hasn’t given Australia a free pass. They highlight that the climate for business investment in non-commodity sectors remains uncertain. The OECD said “sound macroeconomic policies, further tax reform, cuts to red tape and competition boosting measures,” were all necessary to foster non-mining investment.
That’s a blueprint Joe Hockey could use.
On housing, the OECD sounds a warning saying that “the net gains from further monetary expansion in the near term are finely balanced. The momentum in the housing market and possible need for expansionary firepower given uncertainties in the macroeconomic outlook suggest caution.”
But the OECD is positive enough on the Australian growth outlook to state that they assume the RBA will raise rates in “early 2016 in response to improved economic conditions”.
Here is a snapshot of their forecasts.