AUD: OECD projecting growth to pick up to 3% by 2018 - TDS

Research Team at TDS, notes that the OECD released their Global Economic Outlook overnight with a positive outlook for the Australian economy, projecting growth to pick up to 3% by 2018, as resource investment tails off while consumption, investment and the jobs market improve.

Key Quotes

“In fact the OECD states “...no further easing is projected, and rate increases are projected to begin towards the end of 2017 as spare capacity fades.” A key factor behind no further rate cuts are housing market developments, where the OECD states “...Despite the employment of macro-prudential measures to cool the housing market, the net gain from monetary easing has narrowed. Significant housing market concerns remain and there is growing discord between financial market developments and rest of the economy due to the low-interest-rate environment”.  Should growth disappoint, the OECD sees fiscal policy, not monetary policy doing the heavy lifting given housing market concerns. While S&P may have sounded the alarm on Australia’s AAA rating, the OECD does see “space for fiscal loosening given the low public-debt burden” and suggests “accelerated” infrastructure spending could pay dividends across the economy”.”

“The Housing Industry Association’s (HIA) New Home Sales report  showed new home sales fell sharply in Oct. Total Sales fell 8.5%, with detached houses –8.2% and apartments –9.2% the split. The largest reduction in sales volume was in Victoria (-20.4%), WA (-5.6% and NSW (-2.8%). In absolute terms, total new home sales hit the lowest level since July 2014. Tomorrow we will get data on Building Approvals for Oct with Sep showing a 8.7% drop, a much larger than expected decline of 3%.”