World Economy

Economists Bullish on Australia Growth

Economists Bullish on Australia GrowthEconomists Bullish on Australia Growth

Economists in Australia have been rejigging their spreadsheets. The common theme is economic growth forecasts have been downgraded.

UBS chief economist Scott Haslem has been bullish on growth this year, but now says first-quarter GDP “appears to be tracking close to flat”, ABC reported.

AMP’s Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors, said there might be a surprise out there, but flat is probably as good as it gets in the short term.

“Weak March-quarter construction activity along with very weak retail sales and a likely growth detraction from net exports highlights that, absent an upside surprise … March-quarter GDP growth looks likely to be near zero with the risk of another contraction,” Oliver said.

ANZ’s economic team also calculated Q1 GDP—to be released early next month—is shaping up as weak, with growth of 0.1% penciled in, but remains wary of its forecast being optimistic. It is much the same sentiment across the road at National Australia Bank, where last week’s disappointing Q1 construction data has been plugged into its calculations, along with previously released quarterly figures.

“Along with soft partial data to date, there is a real risk that Q1 GDP could print a flat or even a small negative outcome,” is NAB’s house view.

But that is positively chipper compared to the glum commentary from Morgan Stanley.

“Bank mortgage repricing is turning overall debt service into a headwind, adding to household cash flow pressures, and we look for consumption/GDP to disappoint consensus over 2017,” Morgan Stanley’s Daniel Blake wrote in a recent note.

“Indeed, while exacerbated by cyclone Debbie, our tracking estimate for Q1 GDP is -0.2%, which would make two of the last three quarters negative.”

The good news is the two negative quarters were split by the rebound in that last quarter of 2016, so a technical recession has been avoided, just. The bad news is the bulk of the impact of cyclone Debbie will flow into Q2, which is eerily reminiscent of the last time GDP shrank.

Bad weather—rather than a cyclone—had an impact then, but so did weak business investment, insipid consumption and slowing construction—both in residential and non-residential sectors.

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